The Latest News Concerning the Obama Administration's Overtime Rules
You will recall that we wrote previously to outline the Department of Labor's updated overtime rules that were to go into effect December 1, 2016. Those rules would drastically increase the salary threshold for employees to be classified as exempt from overtime under the Fair Labor Standards Act, with the result being that many more workers would be eligible for overtime pay. We then provided an update when the rules were put on hold by a federal court injunction around Thanksgiving. As of now, that injunction remains in effect.
When the injunction was entered, the DOL filed an appeal to the Fifth Circuit Court of Appeals. The states which had brought the challenge filed their response briefs as scheduled. On January 26, 2017, the Court granted the government a 30-day extension for filing its reply brief, for the purpose of allowing the new administration's leadership to review the case and consider the issues. Subsequently, the government filed another extension request, asking for its deadline to be extended until May 1.
So, at this point, the rules remain on hold and the litigation is also on hold. Delays in the appointment and confirmation of a new Secretary of Labor have contributed to the lack of movement. However, just this week during confirmation hearings, Alexander Acosta, the Trump Administration's nominee for Secretary of Labor, hinted that he might not favor a total scuttling of the overtime rules. He noted that the overtime rules were last updated in 2004 and that it was unfortunate that sometimes rules that involve dollar values are not updated for a decade or more "because life does get more expensive." Acosta noted that if the original threshold salary figure ($23,660) were to be adjusted for inflation, then the updated number would be about $33,000. The Obama Administration's rule would have set the figure at $47,476.
It seems possible that if Acosta is confirmed, the new DOL will work to implement some sort of increase, but nothing on the order of the drastic increase under the rules that were to go into effect in December. But it also seems clear that the process for doing so will take time. We will continue to watch to see if the original injunction is upheld as well as any developments by way of new regulations from the Trump Administration.
President Trump Kills "Blacklisting" Rules for Federal Contractors
In 2014, President Obama signed the Fair Play and Safe Workplaces Executive Order. This Executive Order and its implementing rules from the Labor Department and Federal Acquisition Regulatory Council would have required federal contractors to report U.S. labor and employment law violations to federal agencies that award contracts. The Executive Order also would have required these agencies to consider the reporting of violations in their decisions to award federal contracts. Federal contractors referred to these requirements as the "blacklisting" rules, as they were concerned that the reporting of violations, however small, could prejudice their ability to secure work on federal contracts.
The Executive Order was set take effect on October 25, 2016, but the provisions were put on hold in a decision by the U.S. District Court in Texas. In Associated Builders and Contractors of Southeast, et al. v. Rung, the Court halted the implementation of the labor law violation reporting requirements and also reversed a prohibition on mandatory arbitration agreements. According to the Court none of the laws involved in the Executive Order (such as the Fair Labor Standards Act, for example) allowed for debarment or disqualification of federal contractors for violations.
However, the Court left in place the Executive Order's paycheck transparency requirements, which took effect on January 17, 2017. These provisions require federal contractors to provide wage statements that breakdown each employees' hours worked, overtime hours and pay, and any additions to or deductions from pay by the employer. The provision also requires federal contractors to inform their employees if they are being treated as independent contractors or employees for worker classification purposes.
Shortly after inauguration of President Trump, the House passed a resolution to reverse the regulations contained in the Executive Order. This was done pursuant to the Congressional Review Act ("CRA"), which grants Congress the right to undo certain rules within 60-days after they are issued. On March 6, 2017, the Senate adopted this resolution, which passed by one vote of 49-48.
Importantly, President Trump signed the resolution, which means that the Executive Order and all of its regulations have been repealed. Further, the lawsuit by the Associated Builders and Contractors is now moot, and federal contractors will be free of the various reporting requirements by the Executive Order, including the labor law violation and paycheck transparency requirements.
Given recent comments by President Trump and the Republican-controlled Congress, contractors likely won't have to worry about similar rules for some time. Whenever Congress uses the CRA to undo regulations, the agency writing the regulations is prohibited from issuing an identical or similar rule until Congress passes a law allowing them to do so.
If you have any questions concerning the repeal of the Blacklisting Rules, please contact William Burnett by e-mailing him here.
Updated I-9 Handbook for Employers Published
United States Citizenship and Immigration Services (USCIS) announced in late February that an updated version of the Handbook for Employers: Guidance for Completing Form I-9 had been published. The updated Handbook is also commonly referred to its official document number, M-274, and is dated January 22, 2017. The Handbook provides employers with detailed guidance for completing the new Form I-9, which also became effective on January 22, 2017.
The USCIS press release announcing the updated Handbook explains that the Handbook: captures policy and regulatory changes since 2013; is written in plain language so that it is easier to understand; includes a streamlined questions and answers section; features updated tables, new figures, and more current sample documents; and explains guidance regarding automatic extensions for certain Employer Authorization Documents.
The updated Handbook can be downloaded here, and the USCIS's Table of Changes for Revised M-274, which highlights the updates to the Handbook, can be accessed here. If you have any questions about the Handbook or proper completion of the new Form I-9, or if you are considering performing a self-audit of your company's Form I-9s, please contact Philip Siegel. You can e-mail Philip by clicking here, or you can reach him directly at (404) 469-9197.
Days Numbered for OSHA Rule Imposing Continuing Obligation to Record Work Related Injuries and Illnesses
OSHA requires employers to make record of work related injuries and illnesses within seven days after receiving notice that the injury or illness occurred. These records must be maintained for five years. OSHA is also bound to a rule which requires it to issue a citation within six months of an alleged violation of OSHA rules, including its recordkeeping rules.
In the case AKM, LLC d/b/a Volks Constructors v. Secretary of Labor, OSHA cited the contractor for failing to record work related injuries or illnesses, but the citation was issued more than six months from the date the injuries or illnesses were required to be recorded by the contractor. The contractor argued the citation was subject to dismissal because it was issued after the six month statute of limitations expired. OSHA argued that the recording requirement was a continuing obligation of the contractor over OSHA's five year record retention rule, and because the citation was issued within that five year period, it was timely.
Ultimately, the court sided with the contractor and ruled that OSHA could not issue a citation for failing to record an injury or illness beyond the six month statute of limitations set out under the Occupational Safety and Health Act. In response to the court's ruling, OSHA published a rule, which it said was intended to, "clarify that the duty to make and maintain an accurate record of an injury or illness continues for as long as the employer must keep and make available records for the year in which the injury or illness occurred. The duty does not expire if the employer fails to create the necessary records when first required to do so." The rule became effective during January 17, 2017, or three days before President Trump took office. But its days are numbered.
During the month of March, both the republican controlled House and Senate passed a resolution under the Congressional Review Act, which allows regulations to be blocked by a joint resolution of disapproval that the Senate can consider under special expedited procedures and pass with a simple majority, nullifying OSHA's new recordkeeping rule. The resolution now awaits President Trump's signature, and he has indicated he will sign it.
New Incentives for Prompt and Complete Payments to Subcontractors on Federal Projects
On December 20, 2016, the Department of Defense, General Services Administration, and the National Aeronautics and Space Administration issued a final rule amending the Small Business Jobs Act of 2010 and a July 2013 final rule issued by the Small Business Administration (SBA) requiring prime contractors to self-report any untimely or reduced payments made to their small-business subcontractors. The rule further requires contracting officers to keep a record in the Federal Awardee Performance and Integrity Information System ("FAPIIS") of any contractors with a history of late or reduced payments to subcontractors. This final rule became effective on January 19, 2017.
The intent of the rule is to protect small business contractors by creating a record of prime contractors that issue reduced or untimely payments without justification. The rule defines "reduced payment" as a payment that is for less than the amount agreed upon in a subcontract in accordance with its terms and conditions, for supplies and services for which the Government has paid the prime contractor. Additionally, the rule defines an "untimely payment" as a payment to a subcontractor that is more than 90 days past due under the terms and conditions of a subcontract for supplies and services for which the Government has paid the prime contractor. Note that the definitions limit the rule to only payments to the subcontractor for which the prime contractor has been paid. In fact, the rule updates FAR 42.1502(g)(2)(ii) to reflect certain scenarios in which a late or reduced payment is not "unjustified" under the rule. These include instances in which (i) a contract performance dispute exists, (ii) a partial payment is made for an amount not in dispute, (iii) a payment is reduced due to past overpayments on the same contract, (iv) there is an administrative mistake, and (v) late performance by the subcontractor that leads to a corresponding late payment by the prime contractor. As a result, the contractor may justifiably reduce or withhold payment in certain circumstances without violating the rule.
In addition, not only is the rule limited in what payments are affected, but it also limits who it applies to. Importantly, the rule is only applicable to prime contractor payments made to first-tier subcontractors, not to subcontractors at all tiers. Also, small businesses are not required to report violations because it only applies to prime contractors whose contracts contain the clause 52.219-9, Small Business Subcontracting Plan, which is not applicable to small businesses. However, the rule adds FAR clause 52.219-9 to the clauses listed at FAR 52.212-5 for inclusion in commercial item contracts. This means that the scope of the rule is not limited to service contracts, but is also applicable to both commercial items contracts and contracts for commercially available off-the-shelf (COTS) items.
If a prime contractor does make an unjustified reduced or delinquent payment to its small business subcontractors, then the prime contractor has a 14-day window for reporting said payments. Moreover, the prime contractor must insert in all contracts containing FAR clause 52.219-9, Small Business Contracting Plan, a reference to the 14-day reporting requirement. Failure to self-report within the 14-day timeframe will subject the violating contractor to discipline under the rule.
Significantly, the disciplinary actions for violating sections of the rule do not include penalties. In fact, the government has expressly stated in the response to public comments for the rule that penalties are beyond the scope of the rule. Nevertheless, the rule is not without teeth as it permits the contracting officer to issue an "adverse past performance assessment" for failure to comply with the rule, based on individual circumstances. In issuing an adverse past performance assessment the contracting officer will consider the contractor's explanations as well as its history for unjustified reduced or late payments. The rule further requires contracting officers to report to FAPIIS a contractor that has a history of three or more reduced or untimely payments to small business subcontractors within a 12-month period under a single contract that are unjustified. A report to FAPIIS has the potential of adversely impacting the contractor's opportunities for future government contracts.
Taking everything into account, the rule benefits small business subcontractors by incentivizing prime contractors to make prompt and complete payments to them. On the other hand, prime contractors must be diligent in ensuring their subcontractors' proper and timely payment or face the potential of adverse past performance assessments.
If you have any questions about the new federal rule addressing payments to subcontractors on federal projects, please contact Alex Brock by e-mailing him here.