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The WHD also announced it had withdrawn two opinion letters about policies under the Fair Labor Standards Act (FLSA), FLSA2019-6 and FLSA 2019-10, both of which address essential aspects of the final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 The FLSA2019-10 opinion letter has also been withdrawn.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Executive Order Restricting Diversity Training Rescinded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which addressed training for the military, federal employees, grant recipients, and federal contractors, was rescinded by President Biden on January 20, 2021.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.

Biden Directs Agencies to Address Economic Relief, Including Contractor Minimum Wage

Shortly after taking office, President Biden initiated a series of executive actions to provide economic relief in response to the COVID-19 pandemic. Most of the steps address the financial crisis by providing nutritional assistance, improving economic assistance delivery, more significant support for veterans, addressing workplace safety, and improving inter-agency benefit coordination.

While most COVID relief actions have a broad impact, one, in particular, is designed to assist federal government contractor employees. President Biden directed “his administration to start the work that would allow him to issue an Executive Order within the first 100 days that requires federal contractors to pay a $15 minimum wage and provides emergency paid leave to workers.”

Since a federal contractor minimum wage already exists, set at $10.95 per hour starting January 1, 2021 and administered by the U.S. Department of Labor Wage and Hour Division, the new direction will likely result in an amendment of that policy and a phase-in of the higher rate. The fact sheet describing the executive actions can be reviewed here.

WHD Issues Field Assistance Bulletin Addressing Electronic Posting Requirements

The Wage and Hour Division (WHD) has recently issued Field Assistance Bulletin (FAB) 2020-7 to guide field staff regarding the electronic posting of required notices under specific criteria. Under the new guidance, as a matter of enforcement policy, WHD will consider electronic postings by employers to satisfy the employer’s requirement to provide employees with the required notice of their legal rights under various federal labor laws.

The WHD administers several statutes such as the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), and the Service Contract Act (SCA), which include physical posting requirements. However, the WHD acknowledges that employers have to use virtual communications and telework arrangements to meet the challenges of the coronavirus pandemic.

As such, the WHD recognizes the need for electronic postings, and therefore, if a regulation requires posting at a worksite, in most cases, WHD will consider electronic posting an acceptable substitute for the continuous posting requirement where

• All of the employer’s employees only work remotely,
• All employees customarily receive information from the employer via electronic means, and
• All employees have readily available access to the electronic posting at all times.

Employers may now meet their posting obligations by using an email or via an internet or intranet website to reach employees if they meet all three of these specific requirements.

FAB 2020-7 may be found at https://link.zixcentral.com/u/16f6a963/cpe5wdBO6xGSTcUrh3soMg?u=https%3A%2F%2Fwww.dol.gov%2Fsites%2Fdolgov%2Ffiles%2FWHD%2Flegacy%2Ffiles%2Ffab_2020_7.pdf

Minimum Wage for Federal Contractors Set to Increase January 1

Beginning January 1, 2021, the applicable minimum wage rate will increase from $10.80 to $10.95 for employees working on federal contracts covered by Executive Order 13658 (the Order). Contractors working on government contracts should review their payroll records to ensure employees working on current and new contracts reflect the updated employee minimum wage requirement.

The minimum wage requirements apply to the following contractual agreements:

• Procurement contracts for construction covered by the Davis-Bacon Act (DBA);
• Service contracts covered by the Service Contract Act (SCA);
• Concessions contracts, including any concessions contract excluded from the SCA by the Department of Labor’s regulations at 29 CFR 4.133(b); and
• Contracts connected with Federal property or lands, that offer services for Federal employees, their dependents, or the general public.

The Order, Establishing a Minimum Wage for Contractors, was established back in 2014. Provisions of the Order include an annual increase to the minimum wage based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers.

The Order contains a few limited exclusions from minimum wage coverage. Those exclusions include workers employed in a bona fide executive, administrative, or professional capacity and exempt from the FLSA’s minimum wage and overtime requirements are not entitled to receive the Executive Order minimum wage.

The public can find Important information regarding the minimum wage for federal contractors and its implementing regulations here.

USDOL Initiates Davis-Bacon Compliance Effort in Southeast

The U.S. Department of Labor Wage and Hour Division (WHD) announced a Davis-Bacon education and enforcement initiative in eight southeastern states.

In Alabama, Florida, Georgia, Kentucky, Mississippi, North and South Carolina, and Tennessee,  the WHD will engage with federal contracting agencies, the Small Business Administration, and construction trade associations to explain employer Davis-Bacon Act and Davis-Bacon and Related Act responsibilities. The WHD will also provide training seminars directly to contractors.

WHD reported that in fiscal year 2020, Davis-Bacon investigations in these eight states identified violations 78 percent of the time, resulting in back wage liability and several debarments.

The most common mistakes involved employee classification, pay and benefits, recordkeeping, and posting. WHD is making staff available to assist both agencies and contractors.

States Move To Increase Minimum Wage

Recently, Florida became the 29th state to pass legislation increasing their minimum wage. The increase to $15.00 per hour is twice the federal minimum wage of $7.25 established back in 2009. In the absence of a federal increase in the minimum wage, many states and localities have taken action.

The minimum wage has increased in 29 states and D.C. since 2014, with Florida and Rhode Island being the most recent. Florida’s current minimum wage of $8.56 will gradually increase but not reach $15 per hour until 2026. Next year, the wage will rise to $10 per hour on September 30, and from there, it will increase by $1 per year up to 2026.

Florida now joins California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, and New York on a shortlist of states that have enacted a $15 per hour minimum wage.

Contractors that need to comply with minimum wage requirements should be aware that more states may plan to increase their wages in the upcoming new year. According to the U.S. Department of Labor, in cases where a state minimum wage is higher than the federal standard, the higher standard would apply.

GAO Issues Report on SCA Enforcement Part I

The Government Accountability Office released Federal Contracting: Actions Needed to Improve Department of Labor’s Enforcement of Service Worker Wage Protections (GAO-21-11). This article is Part I, and it covers the background and summarizes enforcement trends. Part II will provide more details on enforcement results such as type of violation, work performed, and agencies involved.

The GAO explained that the U.S. Department of Labor (DOL) conducted more than 5,000 Service Contract Act investigations between 2014 and 2019. These investigations found violations 68 percent of the time, which resulted in $244 million of back wage payments, and 60 debarments.

The purpose of GAO’s report was to look at DOL data about SCA enforcement cases, what challenges DOL faces in enforcing the SCA, and contracting agency implementation of the SCA.

DOL can initiate SCA enforcement for various reasons, including employee, agency, union, or other interested party complaints and directed investigations created by DOL. About 60 percent of cases conducted during the period studied were due to a complaint, and the rest were DOL directed. However, the number of investigations resulting from complaints remained steady during the study period; however, the number of agency-directed investigations increased by 18 percent.

Investigations are carried out across five regions by about 760 investigators. The GAO found that SCA investigations comprise about three percent of DOL’s Wage and Hour Division workload. Cases are unevenly divided among the five regions; about one-third were conducted in the Northeast region, and one-fifth were conducted in the Southwest region.

Part II will provide more information on types of violation, work performed, and agencies involved.

OFCCP Publishes RFI on Diversity Training

As a follow-on to Executive Order 13950, “Combating Race and Sex Stereotyping,” the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) published a Request for Information (RFI) on October 22, 2020, seeking public comments.

OFCCP’s RFI invites the public to provide information or materials concerning federal contractors’ workplace training that involves stereotyping or scapegoating. The RFI restates many of the Executive Order’s principles and offers methods to report potential violations.

Comments are due on or before December 1, 2020.  Click here to see the Federal Register announcement.

Executive Order Restricts Diversity Training

On September 22, 2020, the White House issued Executive Order 13950, “Combating Race and Sex Stereotyping.” The sweeping Executive Order states, “it shall be the policy of the United States not to promote race or sex stereotyping or scapegoating” through workforce training.

The Executive Order addresses training for the military, federal employees, grant recipients, and federal contractors. It could have a significant impact on federal contractor training programs.

The Executive Order requires that federal contracts include provisions that

• Prohibit “any workplace training that inculcates in its employees any form of race or sex-stereotyping or any form of race or sex scapegoating”
• Require that contractors provide notice to their labor unions of commitments under the Executive Order and also post the notice in conspicuous places available to employees and applicants for employment
• Recognize that noncompliance could result in loss of contract and debarment, and
• Flow-down these provisions to subcontracts.

The U.S. Department of Labor’s Office of Federal Contract Compliance Program (OFCCP) is directed to establish a hotline and investigate complaints. OFCCP has already posted FAQs to address some of the questions arising out of the Executive Order, including what constitutes race and sex stereotyping and scapegoating, and what are examples of race and sex stereotyping and scapegoating. Link to OFCCP’s FAQ; https://www.dol.gov/agencies/ofccp/faqs/executive-order-13950

OFCCP published a Request for Information on October 22, 2020, to gather information from federal contractors, subcontractors, and employees (https://www.federalregister.gov/documents/2020/10/22/2020-23339/request-for-information-race-and-sex-stereotyping-and-scapegoating). The White House has indicated, however, that it plans to deviate from standard rulemaking and implement the Executive Order by November 21 without a public comment period.

It is unclear how this Executive Order will apply to state and local contracts that result from federal grants. Agencies are directed to “identify programs for which the agency may, as a condition of receiving such a grant, require the recipient to certify that it will not use Federal funds to promote the concepts.”

It is also not clear if this will be automatically applied to existing contracts or if contract clauses will be applied. Additional information will become available by November 21. You can review the Executive Order at https://www.federalregister.gov/documents/2020/09/28/2020-21534/combating-race-and-sex-stereotyping

We will provide more information as it becomes available.