OFCCP Proposed Changes Could be Costly for Contractors

The Office of Federal Contract Compliance Programs has recently proposed five regulations which could, if enacted, result in unprecedented impact on federal contractors. In addition, enforcement efforts by OFCCP to ensure compliance with existing programs have increased significantly in the past year. An OFCCP investigation can be extremely expensive and can take years to complete. OFCCP investigations are not complaint-driven, but are agency-initiated evaluations that are broad-reaching and exhaustive.

The OFCCP resides within the US Department of Labor. It is charged with enforcing employment discrimination and affirmative action regulations for virtually every company that does business of any kind with the federal government. The President of the Equal Employment Advisory Council, which is made up of representatives of nearly 300 federal contractors, testified recently that the proposed changes are likely to have an adverse affect on the very people they are intended to assist, and warned that costs for implementation have been underestimated.

What follows is a very general summary of the proposed changes. This is a complex subject with many technical nuances, and we encourage you to consult your attorney for assistance with your equal employment and affirmative action policies and programs.

The five changes proposed by the OFCCP in 2011 include:

• Rescinding existing guidance on procedures and standards for investigation of systemic compensation discrimination
• Requiring the establishment of targets for the employment of veterans with attendant requirements for documenting the identification, recruitment and treatment of veterans
• Imposition of broad new compensation reporting requirements on contractors
• Requesting permission from OMB to greatly expand the scope and amount of data requested of contractors at the outset of compliance evaluations
• Imposition of a 7% hiring goal for individuals with disabilities and attendant obligations for documenting the identification, recruitment and treatment of individuals with disabilities

For more information on the OFCCP, visit the OFCCP FAQ.

Fringe Benefit Requirement for Service Contract Act Increased to $3.71

Fringe Benefit Requirement for Service Contract Act Increased to $3.71

The Department of Labor has released its annual memorandum which specifies a rate increase for Service Contract Act (“SCA”) health and welfare fringe benefits. The new rate is $3.71 per hour, a 3.3% increase, and becomes effective June 17, 2012.

The new rate will be required in all invitations for bids opened, or other service contracts awarded on or after June 17, 2012. The contracting officer may adjust bids submitted using the old rates without obtaining a new wage determination before issuing the new contract. For existing service contracts, the new rate will go into effect on the anniversary date or the option renewal/modification date, depending on the terms of the contract.

The rate in Hawaii is dependent upon whether an employee is insured pursuant to the state’s mandatory health care law. Contractors operating in Hawaii should review the DOL memorandum and their applicable wage determination requirements.

DOL Announces Four Free Conferences on Prevailing Wage Requirements

The U.S. Department of Labor’s Wage and Hour Division will host four free conferences this summer to cover the rules concerning prevailing wage requirements under the Davis-Bacon Act (DBA), McNamara-O’Hara Service Contract Act (SCA) and the labor standards provisions of the American Recovery and Reinvestment Act of 2009.

In announcing the conferences, Nancy J. Leppink, deputy administrator of the DOL’s Wage and Hour Division, said, “The Department of Labor is committed to ensuring that all of our stakeholders – contractors, contracting officials, unions, workers and other interested parties – understand and are in compliance with the wage and fringe benefit requirements that apply to federal and federally assisted contracts. We are pleased to provide the contracting community with these free prevailing wage conferences that are a key component of the Wage and Hour Division’s ongoing effort to foster good jobs through increased awareness and enhanced compliance of federal prevailing wage requirements.”

The conferences will be held in these cities on the dates indicated:

Los Angeles, CA July 24-26

Miami, FL July 31-August 2

Philadelphia, PA July 10-12

Seattle, WA August 7-9

To attend one of the conferences, send an email to whdpwc@dol.gov that includes the participant’s name, title, organization and email address, as well as the location of the conference you wish to attend. There is no fee to attend, but space is limited. Once your request has been received, a Labor Department representative will follow up to let you know whether your request can be accommodated.

For more information regarding the upcoming prevailing wage conferences, as well as information on the DBA, SCA and the Recovery Act, visit www.dol.gov/whd/govconracts or call the Wage and Hour Division’s toll-free helpline at 866-4US-WAGE(487-9243).

Central Contractor Registration (CCR) Migrating to New SAM System in July

Contractors should be aware that Central Contractor Registration (CCR) will be migrated to a new system, which is expected to begin going live in late July of 2012. The new system will streamline processes, eliminate redundancies, and save money by consolidating operations. Only one log in will be needed and the integration will decrease the amount of time required for registration.

The new system is called “SAM”, which stands for The System for Award Management. It will combine eight federal procurement systems and the Catalog of Federal Domestic Assistance into one new system.  The systems which will be migrated to SAM include:

Phase I:
• Central Contractor Registration
• Online Representations and Certifications Application
• The Excluded Parties List System

Phase II:
• Federal Business Opportunities
• Catalog of Federal Domestic Assistance
• Electronic Subcontracting Reporting System
• Federal Funding Accountability and Transparency Act
• Sub-award Reporting System
• Wage Determinations Online
• Federal Procurement Data System – Next Generation
• Past Performance and Information Retrieval System

The first phase of the system is currently scheduled to be available in late July. Contractors who are currently registered with CCR will receive an email that their registration is about to expire, and will then register with the new system at SAM.gov. All contractor information will be migrated to the new system, and will be available following registration.

Currently there is no way to receive updates on progress of the new system via email. Contractors are encouraged to check SAM.gov for updates.

DOL Issues Final Rules on Sponsor Fee Disclosure

The U.S. Department of Labor has issued final regulations under ERISA 408(b)(2) sponsor fee disclosure. Due to their delay in issuing the final rule, the DOL also extended the due date for sponsor fee disclosure by 3 months, until July 1, 2012, from the previously extended April 1st date.

As a result of the change in implementation dates for sponsor level fee disclosure, the DOL also extended the timing for participant fee disclosure under ERISA 404(a). Now, the standard “annual” disclosure for participant-directed plans will be due no later than August 30, 2012, and the quarterly participant statement fee disclosure must be furnished before November 14, 2012.

You can get information about the final rule directly from the DOL website at the following link:

http://www.dol.gov/ebsa/newsroom/fs408b2finalreg.html

Additionally, changes made from the “interim” final rule are available at the following link:

http://www.dol.gov/ebsa/408b2changes.html

Important Developments for California Employers

California’s Wage Prevention Theft Act (the “Act”), Labor Code Section 2810.5, took effect on January 1, 2012. The California Labor Commissioner recently posted 15 frequently asked questions about the Act on its website. According to Simpson, Garrity, Innes and Jacuzzi, PC, a California-based law firm specializing in employment and labor law, the Labor Commissioner’s responses to the FAQs appear to significantly expand employers’ obligations. These responses can be viewed here.

An important addition from the FAQs is that the notice must be a standalone document.  Including the information in an offer letter will not meet the requirements of the statute.

The FAQs are also very specific about requirements for electronic notice. A company that provides the notice electronically must have a system where workers can acknowledge receipt of the notice and print out a copy of the notice.

The FAQs also state that a signed notice is not sufficient to constitute a voluntary written agreement between the employer and employee to credit any meals or lodging against the minimum wage.  Written agreements to this effect must be contained in another separate document.

The FAQs failed to address several significant unanswered questions about the notice form, such as what it means for an employee to be employed pursuant to a “written” or “oral” agreement and what is meant by the Labor Commissioner’s reference to businesses or entities that “administer wages or benefits.”

On December 29, 2011, the Labor Commissioner issued a template Wage Disclosure Notice form that employers may use, which can be found at http://www.dir.ca.gov/dlse/Governor_signs_Wage_Theft_Protection_Act_of_2011.html.  The website includes translations into Spanish, Vietnamese, Chinese, Korean, and Tagalog.

Should any of the above required notice information changes, the employer must provide the employees notice of these changes within seven days by: (1) providing a written amendment to the statement; (2) issuing an entirely new notice; or, (3) via paycheck stub, if the updated information is contained on the paycheck stub.

All non-exempt, private sector employees are covered by the Act for purposes of receiving the notice, except employees covered by a collective bargaining agreement that provides premium overtime rates and an hourly wage that is at least 30 per cent more than minimum wage. The notice must be provided to employees “in the language the employer normally uses to communicate employment-related information with the employee.”

Penalties for non-compliance include: a civil penalty pursuant to Labor Code Section 2699(f)(2) of one hundred dollars ($100) for each aggrieved employee per pay period for the initial violation and two hundred dollars ($200) for each aggrieved employee per pay period for each subsequent violation.

The Act requires employers to give covered, non-exempt employees a customized notice at the time of hire with the following specific information about their wages and other employment-related information upon hire:

• The rate or rates of pay and basis thereof, whether paid by the hour, shift, day, week, salary, piece, commission, or otherwise, including any rates for overtime, as applicable;
• Allowances, if any, claimed as part of the minimum wage, including meal or lodging allowances;
• The regular payday designated by the employer in accordance with the requirements of the Labor Code;
•  The name of the employer, including any “doing business as” names used by the employer;
•  The physical address of the employer’s main office or principal place of business, and a mailing address, if different;
• The telephone number of the employer;
• The name, address, and telephone number of the employer’s workers’ compensation insurance carrier;
• Any other information the Labor Commissioner deems material and necessary.

Rights-Posting Implementation Date Delayed Again

A statement on the NLRB website announces that The National Labor Relations Board has agreed to postpone the effective date of its employee rights notice-posting rule at the request of the federal court in Washington, DC hearing a legal challenge regarding the rule. The Board’s ruling states that it has determined that postponing the effective date of the rule would facilitate the resolution of the legal challenges that have been filed with respect to the rule. The new implementation date is April 30, 2012.

Most private sector employers will be required to post the 11-by-17-inch notice on the new implementation date of April 30. The notice is available at no cost from the NLRB through its website, www.nlrb.gov, which has additional information on posting requirements and NLRB jurisdiction.

NLRB Split Along Party Lines on Proposed rule

The National Labor Relations Board met yesterday to vote on a proposed rule that would shorten the amount of time between employees filing to start a union and the day the vote is cast. The NLRB, which currently has only three members, was split 2 – 1 along party lines, with the lone Republican voting against the proposed rule. The NLRB is required to have three members to constitute a quorum.  Republican member Craig Hayes has considered resigning, which would leave the Board without the quorum needed to make new rules. In addition, Democratic member Craig Becker’s recess appointment to the Board is set to expire in December.

You can read the LA Times coverage of the NLRB and yesterday’s vote here.

DOL Sues Wisconsin-based Contractor; Alleges Failure to Remit PW Contributions

The U.S. Department of Labor recently announced that it has sued B & K Builders Inc. of Marshfield and its co-owners, Robert Aschenbrenner and Kenneth Staab, to restore $17,835.41 plus interest to the company’s 401(k) profit-sharing plan. Additionally, the suit seeks restitution of $97,307.79 from B & K Builders Inc. and Staab as fiduciaries to the B&K Builders Inc. Prevailing Wage Plan.

The case is the result of an investigation by the department’s Employee Benefits Security Administration into alleged violations of the Employee Retirement Income Security Act.

The lawsuit alleges that the company, Aschenbrenner and Staab failed to forward $17,835.41 in employee contributions to the company’s 401(k) plan from Sept. 23, 2006, to May 15, 2008.  They also failed to timely remit employee contributions to the plan from June 30, 2005, to Aug. 24, 2006.  The plan had 52 active participants and $222,633 in assets as of March 31, 2009, the latest information available.

The suit also alleges that B & K Builders Inc. agreed to utilize a portion of the money received under state and federal contracts to pay employer contributions to the Prevailing Wage Plan. The Prevailing Wage Plan mandates that B & K Builders Inc. pay required prevailing wage contributions to the Prevailing Wage Plan.  Staab and B & K Builders Inc., as fiduciaries, failed to remit $97,307.79 in employer contributions for the period of June 2007 through June 2009 to the Prevailing Wage Plan.

The suit seeks a court order to restore money owed to both plans; correct transactions prohibited by law; remove B & K Builders, Aschenbrenner and Staab from serving as fiduciaries to the plans; and permanently bar them from serving as fiduciaries to any ERISA-covered plan in the future.  It also asks the court to appoint an independent fiduciary to administer the plans.

You can read the DOL’s News Release here.

Advance Notice of OFCCP Rulemaking

An advance notice of public rulemaking was recently released by the OFCCP requesting input on the development of a system to capture federal contractor salary information.  The notice states that the purpose is to assist with efforts to prevent salary discrimination. Comments must be submitted by October 11, 2011.

This system would only apply to contractors with more 50 employees and $50,000 in federal contracts.  It would not apply to construction firms, but it would apply to other types of federal contractors.

While the system and the rule are far from being implemented, the volume and types of information being requested make it appear this would be quite onerous. Much of the information requested might not be easily available, and if implemented this would likely be a difficult and expensive requirement for some contractors to comply with.

More information on the notice can be found here.