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Federal contractors play a vital role in helping agencies meet the needs of our citizens, including the critical response efforts to COVID-19. The Office of Management and Budget recently put out an Executive Memorandum regarding federal contractors and COVID-19 that we wanted to make sure you reviewed.
We are pleased to report that after submitting a letter to the governor this evening expressing the need for clarity around construction’s essential function during a crisis, the Newsom Administration updated their Executive Order.
Construction, including housing construction, is listed as an essential need during this crisis.
This clarification will allow our industry to continue working on critical infrastructure improvements essential during this time, including hospital construction and upgrades, building schools, and ensuring our roads and bridges are safe for first responders.
The National Labor Relations Board (NLRB) final rule for the joint-employer standard under the National Labor Relations Act is intended to provide well-defined criteria that encourage important collective bargaining and promotes the purpose of the Act. The final rule, which takes effect on April 27, 2020, aims to provide detailed guidance.
The standard established by the final rule restores the joint-employer status that the NLRB applied for several decades before the 2015 decision in Browning-Ferris. The joint-employer standard under the NLRA is essential because it provides the framework by which the NLRB will determine whether a business is an employer of employees directly employed by another employer altogether.
Under the final rule, an employer may be considered a joint employer only if the two employers share or co-determine the employees’ terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction. Additionally, the final rule establishes key terms, such as what is considered “essential terms and conditions of employment.” Specifically, noting that the employer must also possess and exercises such substantial and direct and immediate control and that it warrants a finding that it “meaningfully affects matters relating to the employment relationship.”
During the announcement of the final rule, NLRB Chairman John F. Ring stated, that the final rule gives our joint-employer standard the clarity and stability that is essential to any successful labor-management relationship. Ring stated, “With the completion of today’s rule, employers will now have certainty in structuring their business relationships, employees will have a better understanding of their employment circumstances, and unions will have clarity regarding with whom they have a collective-bargaining relationship.”
The coronavirus epidemic, which began in January, has continued to exact a significant human and financial toll. As of the beginning of March, there have been more that 83,000 confirmed cases of persons infected with the virus and over more than 2,800 deaths, surpassing the death toll from the SARS (Severe Acute Respiratory Syndrome) virus in 2003. The World Health Organization has declared the coronavirus a global health emergency. Most of the cases initially occurred in the Chinese province of Hubei, which was quarantined. The virus has since spread to South Korea, Japan, Europe, and the Middle East, and is expected to begin gaining a foothold in the United States. A vaccine is not expected to be available to the public for many months.
How have the financial markets reacted? The US stock market, after an initial rally, has corrected at the fastest pace on record.
Looking back in time, markets generally shrugged off viruses so long as they were perceived as being under control. The SARS virus, after driving an initial selloff in 2003, was largely contained and the S&P 500 index rose nearly 30% for the year.
Are things different this time? The answer has been a resounding yes.
Why have the financial markets reacted so suddenly and violently to the coronavirus epidemic?
US stock prices had been at record highs and had been buoyed by expectations that the Federal Reserve will continue to lower interest rates. However, the coronavirus has more than tested the resilience of the stock market. For investors, portfolio diversification and strategic asset allocation remain important. Although the stock market will rebound at some point, market timing in terms of calling a bottom or “buying the dip” is likely to be futile in this uncertain and volatile environment.
NOTE: Information presented herein is for discussion and illustrative purposes only and is not a recommendation or an offer or solicitation to buy or sell any securities. Past performance is not a guarantee of future investment results.
Frederic P. Slade, CFA
Assistant Vice President and Senior Director, Investments
Pentegra Retirement Services
March, 2020
About Frederic Slade
Fred Slade has over 25 years of experience in the investment management and retirement services industries. He is Senior Director, Investments for Pentegra Retirement Services, a leading provider of retirement services to financial institutions and organizations nationwide, founded by the Federal Home Loan Bank System in 1943. Mr. Slade has managed over $1 billion in internal bond portfolios and provides analytics and strategy for Pentegra’s Defined Benefit and Defined Contribution Plans. Mr. Slade holds a Ph.D. in Economics from the University of Pennsylvania and a CFA, and has presented at a number of seminars and conferences.
A recent Armed Services Board of Contract Appeals’ (ASBCA) decision serves as a reminder of the complexity of successor obligations on Service Contract Act-covered contracts. The appeal involves Alutiiq Commercial Enterprises LLC (ACE), which filed a claim against the Air Force for $1.7 million resulting from a higher cost arising from a Collective Bargaining Agreement.
ACE received a contract to provide base civil engineering support services and operations management at Tinker AFB, OK. Before ACE, Tinker Support Services JV (TSS) had the contract; they also had a collective bargaining agreement.
ACE’s initial contract included a two-month phase-in, in which TSS continued to perform services, and five one-year option periods. During the transition, ACE and the union were negotiating a new CBA to replace the CBA between TSS and the union. Option I of the ACE contract was exercised, but the union was not notified.
The Federal Acquisition Regulation requires interested parties under a CBA to be notified at least 30 days in advance of an option being exercised. However, the Air Force claimed the notification requirements did not apply because ACE did not have service employees during the transition.
ACE and the union eventually reached an agreement, and ACE submitted a request for equitable adjustment, in part, requesting increased costs resulting from the new CBA. The Air Force denied the adjustment.
ACE appealed to the ASBCA, which held “the contracting officer was required to provide written definitive notice of the exercise of the option to both the incumbent contractor and the collective bargaining agent.” The ASBCA recognized that the phase-in period created an unusual situation.
While successor obligations under SCA are usually clear, this was a confusing situation for several reasons. This appeal decision should serve as a reminder to be aware of the many technical issues involved when an SCA-covered contract is awarded, or an option is exercised. This is a link to the decision; https://www.asbca.mil/Decisions/2020/61503%20Alutiiq%20Commercial%20Enterprises,%20LLC%2001.09.2020.pdf
New York Governor Andrew Cuomo presented the State’s proposed budget for 2021. The budget includes spending increases to combat climate change, improve education, and fight homelessness. The most significant proposal for the construction industry is the additional funding for infrastructure.
Governor Cuomo started with a $100 billion investment in infrastructure before 2020, then added another $175 billion in the 2021 budget to bring the total to $275 billion. The additional funds support transportation and mass transit systems, affordable housing, education, and the environment. Specific infrastructure plans include:
While many infrastructure initiatives are already underway, the 2021 budget needs to be approved before the additional $175 billion can be utilized. The next step in the New York budget process is for the New York Legislature to review, change, and enact into law.
The U.S. Department of Labor’s Wage and Hour Division (WHD) released the dates of their upcoming prevailing wage seminars for 2020. These three-day compliance training workshops are designed for regional stakeholders such as private contractors, unions, state agencies, federal agencies, and workers.
WHD 2020 seminars will be held in the following locations:
During the seminars conference participants, will cover the following topics: The Davis-Bacon Act and McNamara O’Hara Service Contract Act; Executive Order 13658 “Establishing a Minimum Wage for Contractors”; the process of obtaining wage determinations and adding classifications; the process for appealing wage rates, coverage, and compliance determinations; and compliance assistance and enforcement processes.
For more information go to: https://www.dol.gov/agencies/whd/government-contracts/construction/seminars
Last week the Wage and Hour Division (WHD) announced a final rule that helps to clarify the role perks and benefits play when calculating the regular rate of pay, making it easier for employers to compensate employees. The Rule promotes compliance with the Fair Labor Standards Act (FLSA) and encourages employers to provide additional benefits to employees that reflect today’s workplace.
This Rule is the first significant update to the regulations governing the regular rate requirements under the FLSA in more than 50 years. Until now, employers were often uncertain about the rules and what forms of payment should be included and excluded in the FLSA “time and one-half” calculation when determining overtime rates.
This update focuses on explaining which perks, benefits, and other miscellaneous payments must be included in the regular rate of pay. Also, the Rule offers employers guidance, which encourages employers to provide contemporary benefits to their employees without fear of costly litigation.
The Final Rule will become effective on January 15, 2020.
Recently the NY City Council passed a bill to extend the existing building service prevailing wage law to include new affordable housing. The bill requires that future affordable-housing developments and preservation projects with 120 units or more pay building-services workers a living wage.
Based on the principle that if developers receive financial assistance to build affordable housing units, building service workers should also receive a prevailing wage that includes affordable housing benefits. The law would require future developments that get more than $1 million in aid from the city for construction or preserving rent-stabilized low-income units to pay the prevailing wage to building-service workers.
Building-service workers will now be guaranteed that as the city builds and preserves 300,000 affordable housing units in low-income communities, that the workers in those buildings would be able to afford similar housing.
Opponents of the bill believe it will add billions to the cost of developing affordable housing, money that the City Council does not include.
Recently, U.S. the Department of Labor (DOL) announced a Notice of Proposed Rule Making (NPRM), which would allow employers subject to the Fair Labor Standards Act (FLSA) overtime requirement to offer incentive-based pay and other bonuses to employees whose hours vary from week-to-week. The NPRM seeks to provide clarity to ensure the salary and payments are compatible with the use of the fluctuating workweek method under the FLSA.
The FLSA requires time-and-one-half the regular rate of pay for any hours above 40 that an employee works in a week unless the employee is “exempt.” For some employees, however, there is the alternative “fluctuating workweek method” under the FLSA, in which employers have another method of calculating overtime when employee work hours fluctuate.
The NPRM lays out the plan to revise the existing regulations implementing the FLSA fluctuating workweek regulation (29 CFR 778.114) to explain the circumstances under which employers may use an alternate method. Changes will include explicitly stating requirements, adding examples, improving readability, and changing the title of the regulation to reflect the purpose of the subsection better.
The public has 30 days to review the NPRM (RIN Number: 1235-AA31) and is encouraged to submit comments on the proposed rule.