California Supreme Court Decision Changes Prevailing Wage Requirements In Special Districts

The California Supreme Court (Court) recently issued a decision that may expand the prevailing wage law. Traditionally the prevailing wage law has been interpreted to apply to construction-related work only. In Kaanaana v. Barrett Business Systems, the Court sustained a Court of Appeal decision that does not limit its application when the work is for public utility, reclamation, and other special districts. Thus, based on the Court’s interpretation, work for such public entities must be paid at prevailing wages.

Under the existing law, prevailing wage rates must be paid to all workers employed on “public works” projects that exceed $1,000.  Customarily, “public works” is understood to only apply to activities that are characterized as construction, including demolition, installation, repairs, and certain maintenance activities. But the Court reexamined this assumption and concluded that specific types of special districts are independent of traditional limitations to infrastructure-related work. Therefore potentially extending the prevailing wage law to any manual or non-manual work done under a contract with a special district worth more than $1,000.

Currently, the state Labor Commissioner prescribes prevailing wage rates for construction and maintenance-related workers. However, now the Commissioner may need to make such a wage determination applicable to other types of contract work included within prevailing wage requirements.

Virginia’s New Prevailing Wage Law In Effect

The Virginia Prevailing Wage law became effective May 1, 2021, requiring contractors and subcontractors working with any Virginia State agency or localities under any public contract over $250,000 to pay prevailing wages and benefits to all workers performing services on that contract. Contractors need to be aware that the law also has certification and record-keeping requirements for which there are hefty penalties for non-compliance.

The law applies to any existing public contract over $250,000 that has adopted the new prevailing wage requirements. Any solicitations issued by Virginia agencies or localities on or after May 1, 2021, are expected to have the prevailing wage requirements incorporated into the bid solicitation or contract itself.

Contractors and subcontractors doing work for Virginia should be aware that:

• Upon awarding a public contract subject to the new law, they must certify to the Department of Labor and Industry (DOLI) Commissioner the pay scale for each craft or trade employed under the public contract.
• They are required to preserve wage payment records for which the DOLI may request an audit.
• They are required to prominently post the prevailing wage rate for each craft and classification on the project in easily accessible places.

Those who do not comply are responsible for repaying the prevailing wage due, plus an annual rate of eight percent accruing from the date the wages were unpaid and disqualification from bidding on public contracts until the contractor pays all its workers in full. Additionally, contractors who willfully violate the law will be guilty of a Class 1 misdemeanor, which involves up to twelve months of jail confinement, a fine of up to $2,500, or both.

New Bipartisan Infrastructure Framework

The White House announced an agreement with a bipartisan group of Republican and Democratic Senators on a Bipartisan Infrastructure Framework. The deal calls for $1.2 trillion in total spending and nearly $600 billion in new spending.

According to the White House fact sheet, the Plan makes “investments in clean transportation infrastructure, clean water infrastructure, universal broadband infrastructure, clean power infrastructure, remediation of legacy pollution, and resilience to the changing climate.” Supporters cite the Framework’s benefits, job creation, and improved U.S. competitiveness.

Specifically, the Bipartisan Infrastructure Framework will

• Modernize and expand transit and rail networks;
• Repair and rebuild roads and bridges;
• Build a national network of electric vehicle charging stations;
• Electrify school and transit buses;
• Eliminate lead water lines;
• Expand high-speed internet;
• Upgrade the power infrastructure;
• Create a new Infrastructure Financing Authority;
• Make infrastructure more resilient in general to climate change, cyber-attacks, and extreme weather.

The Bipartisan Infrastructure Framework will result in one of the most significant investments in U.S. infrastructure and competitiveness in history. Critics have pointed at the cost, but the Framework also addresses potential funding methods such as unemployment insurance program integrity, the redirection of unused unemployment relief funds, reinstatement Superfund fees for chemicals, 5G spectrum auction proceeds, and others.

A great deal of work still needs to be done by the White House and Members of Congress that support the Framework before it can be approved.

Biden Administration Releases FY22 Budget Request

President Biden released the federal government’s budget request for fiscal year 2022. The budget requests $5.7 trillion in spending in FY22, which is about $1.5 trillion less than FY21. During the past several years, covid relief increased federal spending.

Biden’s budget addresses several administration priorities such as the infrastructure, families, and a commitment to reinvest “in crucial public services, benefits, and protections.”

One of the agencies that will play a leading role in implementing the administration’s priorities is the U.S. Department of Labor. Labor’s budget request for FY22 is $14.2 billion, a $900 million increase over FY21. The U.S. Department of Labor is responsible for several initiatives such as enhancing economic pathways for workers and improving worker protections and equity.

One of the Labor bureaus of interest is the Wage and Hour Division (WHD), which enforces workforce protections such as the Davis-Bacon Act and Service Contract Act. The budget request calls for $327.5 million in FY22, a $32.5 million increase compared to FY21. The majority of the increase would add 175 FTE to restore enforcement staff.

The administration’s budget request is just a proposal and would require Congressional approval. However, the request signals the administration’s policy priorities.

WHD Announces the Withdrawal of the Independent Contractor Rule

Earlier this month, the Wage and Hour Division (WHD) announced the withdrawal of the Independent Contractor rule effective May 6, 2021. The announcement noted that the current final rule published on January 7, 2021, had significantly undermined safeguards against unfair pay practices. Therefore the withdrawal was essential to protect workers’ rights to the minimum wage and overtime compensation protections of the Fair Labor Standards Act (FLSA).

In February, as the new Biden administration transitioned in, the WHD published a proposal to delay the Independent Contractor Rule’s effective date to allow for time to consider potential issues associated with the rule established by the Trump administration. The WHD followed this in March with a notice of proposed rulemaking (NPRM) to withdraw the Independent Contractor Rule explaining that the rule was inconsistent with the FLSA’s text and purpose and would have a confusing effect on workers and businesses alike due to its departure from judicial precedent.

The WHD sought comments on its NPRM to withdraw the Independent Contractor Rule, providing a comment period that expired on April 12, 2021, for which they received more than 1,000 responses. The commenters expressed opposition to the Independent Contractor Rule predominantly because the rule would have facilitated the exploitation of workers reclassified or misclassified as independent contractors due to the rule.

After considering the comments submitted in response to the NPRM, the WHD finalized the withdrawal of the Independent Contractor Rule. They anticipate that the withdrawal of the independent contractor rule will avoid a decline in workers’ access to employer-provided fringe benefits such as health insurance and retirement plans and avoid a reduction in other benefits such as workers’ compensation coverage and unemployment insurance.

Biden Issues Executive Order Raising Minimum Wage for Federal Contractors

President Biden issued an Executive Order (Order) requiring federal contractors to pay a $15 minimum wage by January 30, 2022, to employees working on covered federal contracts. The Order aims to promote economy and efficiency in Federal procurement by increasing the hourly minimum wage paid by the parties that contract with the Federal Government.

This Order builds on former President Obama’s 2014 Executive Order 13658, requiring federal contractors to pay employees working on federal contracts $10.10 per hour, subsequently indexed to inflation. Currently, workers performing work on covered federal contracts are entitled to a minimum wage of $10.95 per hour, and the tipped minimum wage is $7.65 per hour.

By January 30, 2022, all agencies must implement the $15.00 minimum wage into new contract solicitations, and by March 30, 2022,  all new contracts must reflect the minimum wage.  Additionally, agencies need to implement the new higher wage into existing contracts when parties exercise their option to extend.

The change applies to a wide range of federal workers from cleaning and maintenance, nurses, cafeteria, and other food service workers and tipped workers previously left out. The federal contractor minimum wage applies to contracts covered by the Davis-Bacon Act, the Service Contract Act, and others.  Furthermore, the Order extends the required $15 minimum wage to federal contract workers with disabilities.

The U.S. Department of Labor Wage and Hour Division and the Federal Acquisition and Regulatory Council will initiate the rulemaking to implement and enforce this Order. After 2022, the minimum wage will also be subject to annual inflation increases set forth by the Secretary of Labor.

The fact sheet detailing the executive actions can be reviewed at https://www.whitehouse.gov/briefing-room/statements-releases/2021/04/27/fact-sheet-biden-harris-administration-issues-an-executive-order-to-raise-the-minimum-wage-to-15-for-federal-contractors/

Biden Proposes $2 Trillion Infrastructure Plan

The Biden administration has released a $2 trillion proposal to rebuild infrastructure and reshape the economy. President Biden’s plan will take eight years to accomplish and is intended to fix transportation infrastructure, create jobs, and improve Americans’ quality of life.

A large portion of the President’s plan invests in transportation infrastructure, including repairing roads and bridges, modernizing public transit, creating reliable passenger and freight rail service, improving ports, waterways, and airports. Also, a key focus within the plan is revitalizing digital and power infrastructure.

The plan emphasizes the need to become more resilient by safeguarding critical infrastructure and services, defending vulnerable communities, and maximizing land and water resources’ resilience to protect communities and the environment. To help accomplish Biden’s plan, the Administration will expedite federal decisions prioritizing stakeholder engagement and maximizing equity, health, and environmental benefits.

The plan’s cost will be paid for by raising corporate taxes, particularly from multinationals businesses that earn overseas profits. President Biden explained those increases are meant to encourage companies to produce and invest more in the United States. The Administration noted that the tax increases would offset spending in 15 years, eventually reducing the budget deficit.

The plan will need to be passed by Congress, where it could face opposition for its tax increases and impact on the national debt.

President Biden Engages in Infrastructure Talks

President Biden recently met with Transportation Secretary Pete Buttigieg and a bipartisan group of Members of Congress from the House Transportation and Infrastructure Committee to discuss the vital need to invest in modern and sustainable American infrastructure. This meeting was the Administration’s second in the past month to discuss infrastructure plans with Members of Congress and stakeholders. It is part of an ongoing focus to strengthen and enhance the Country’s roads, bridges, waterways, schools, housing, and more.

According to the White House, the participants “discussed their shared commitment to working across the aisle to build modern and sustainable infrastructure in rural, suburban, and urban areas across the country that create good-paying, union jobs and support the economic recovery.”

The participants also agreed that there is a need to ensure that all infrastructure is modernized to withstand any impacts of climate change while also creating skilled-trade jobs across construction, manufacturing, and engineering sectors to better position America in the 21st century.

However, while the goal of modernizing American’s Infrastructure is bipartisan, how to fund an infrastructure plan is not. The Administration has not decided whether to push infrastructure as a stand-alone bill or as part of a broader package. Either way, Biden’s infrastructure plan will likely face disagreements among party lines.

WHD Delays Final Rule Defining Independent Contractor Status under the FLSA

Earlier this month, the Wage and Hour Division (WHD) announced they would delay the final rule entitled “Independent Contractor Status under the Fair Labor Standards Act” to allow WHD additional opportunity for review.

The final rule was published on January 7, 2021. It had revised the interpretation of independent contractor status under the FLSA to help guide companies struggling with FLSA compliance and how to define an employee vs. an independent contractor. This rule was to take effect on March 8, 2021. However, as expected, the incoming Biden administration challenged this final rule instituting the President’s “Regulatory Freeze Pending Review,” an action that proposes to delay the rule until May 7, 2021.

The WHD also announced it had withdrawn two opinion letters about policies under the Fair Labor Standards Act (FLSA), FLSA2019-6 and FLSA 2019-10, both of which address essential aspects of the final rule.

The FLSA2019-6 opinion letter addressed the same issue under consideration by the WHD; independent contractor status under the FLSA. Therefore, the WHD is removing this opinion letter consistent with its proposed delay of the final rule. The FLSA2019-10 opinion letter has also been withdrawn. Several Courts have declined using this letter noting it was inconsistent with WHD’s regulations and because the letter did not adequately explain WHD’s change in position. Instead, these courts continued to follow WHD’s longstanding prior position.

These withdrawals are official rulings of the WHD, and these letters may not be relied upon as a statement of agency policy as of the dates of withdrawal.

Executive Order Restricting Diversity Training Rescinded

The Executive Order “Combating Race and Sex Stereotyping,” which addressed training for the military, federal employees, grant recipients, and federal contractors, was rescinded by President Biden on January 20, 2021. This issue has been addressed in earlier blog posts.

The diversity training Executive Order’s rescinsion was included in a broader Executive Order on “Advancing Racial Equity and Support for Underserved Communities Through the Federal Government.” The new Executive Order’s goal is to advance equity across the Federal Government through multiple initiatives.

The original order on diversity training that affected government contractors was signed on September 22, 2020. It applied to contracts entered into starting November 21, 2020. On December 22, 2020, a federal court issued a preliminary injunction prohibiting the Office of Federal Contract Compliance Program from implementing the rule.

Despite the on-again, off-again nature of this rule, agency actions to terminate or restrict contracts resulting from the original order will likely cease as a result of the new order.