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New DOL Guidance to Impact Construction Companies With Government Contracts

Workforce Development

, from Construction Executive

Construction projects are inherently labor intensive. From the start of a project to the end, there are architects, engineers, foreman, safety crew and, of course, construction workers.

Accordingly, construction companies are (or should be) attuned to changing labor laws, as changes often impact most, if not all, employees. Construction companies that have or plan to seek government contracts and subcontracts must be aware of and comply with the Fair Pay and Safe Workplaces Final Rule and related Department of Labor Guidance.

DISCLOSURE OF LABOR LAW VIOLATIONS

The final rule requires government contractors—such as construction companies and providers—to disclose labor law violations to contracting agencies. These violations include civil judgments, administrative decisions and arbitration awards for the past three years. Fourteen labor laws fall in the purview of the final rule, many of which are familiar to construction companies:

  • Fair Labor Standards Act, which establishes minimum wages and overtime pay eligibility;
  • The Occupational Safety & Health Act of 1970, which regulates occupational health and safety;
  • Davis-Bacon Act, which requires prevailing wages on public works projects;
  • Service Contract Act, which requires prevailing wages for service contracts;
  • The Family & Medical Leave Act, which requires job protection and unpaid leave for qualified family and medical reasons; and
  • American with Disabilities Act, which prohibits discrimination against disabled employees.

Contracting officers, along with labor compliance advisors, will be required to consider any disclosures when deciding to award contracts or extensions.

CONSTRUCTION COMPANIES THAT WILL NEED TO COMPLY

All types of constructions companies, regardless of specialty, will be subject to the final rule if they execute on federal prime or subcontracts after Oct. 25. Specifically, the final rule explains that the core reporting requirements will eventually apply to all prime contracts and subcontracts estimated to be greater than $500,000 after Oct. 25. However, subcontracts for commercially available off-the-shelf items will not be subject to the rule.

The final rule will use a phased-in approach for both prime contracts and subcontracts. For example, when the final rule takes effect Oct. 25, it first applies to prime solicitations and contracts issued on or after Oct. 25 that are estimated to be valued greater than $50 million.

However, starting April 25, 2017, the reporting requirements will apply to prime solicitations and contracts issued on or after Oct. 25, 2016, that are estimated to be valued greater than $500,000.

In addition, subcontractors will not be subject to the reporting requirements until Oct. 25, 2017. However, government contractors often wear dual hats as prime contractors and subcontractors. Accordingly, companies may find themselves in a situation in which a prime contract may trigger compliance requirements on Oct. 25, 2016, even though the company may traditionally be a subcontractor.

WHAT MUST BE REPORTED

The final rule requires contractors bidding on covered contracts to disclose violations of the applicable labor laws resulting in “administrative merit determinations, civil judgments, or arbitral awards or decisions” in the past three years. These terms encompass a large amount of situations.

An “administrative merit determination” is “a notice or finding—whether final or subject to appeal or further review—issued by an enforcement agency following an investigation that indicates the contractor or subcontractor violated any provision of labor laws.”

Enforcement agencies include the Department of Labor and its divisions: the Occupational Safety & Health Administration (OSHA), the Office of Federal Contract Compliance Programs, the Equal Employment Opportunity Commission (EEOC) and the National Labor Relations Board. Types of administrative merit determinations that will need to be disclosed are OSHA citations, EEOC Reasonable Cause determinations, and Wage and Hour Division determination letters finding FLSA violations.

A “civil judgment” is “any judgment or order entered by any federal or state court in which the court determined the contractor or subcontractor violated any provision of the labor laws, or enjoined or restrained the contractor or subcontractors from violating any provision of the labor laws.” Civil judgments include final orders by federal and state courts, preliminary injunctions and consent judgments. Contractors will not have to disclose settlements where the lawsuit is dismissed without an entry of judgment.

An “arbitral award or decision” is “any award or order by an arbitrator or arbitral panel in which the arbitration or arbitral panel determine the contractor or subcontractor violated any provision of the labor laws, or enjoined or restrained the contractor or subcontract from violating any provision of the labor laws.” These include private or confidential decisions.

BE PROACTIVE

The final rule furthers a trend of the government requiring contractors to tell on themselves. To survive in this environment, construction companies can take a few proactive steps to stay ahead of the compliance curve.

  • Update policies and procedures to track and identify potential disclosures and make them on covered contracts.
  • Provide management, legal, compliance and proposal teams with training on the final rule.
  • Increase internal controls to prevent labor law violations, such as ensuring any prevailing wage requirements are satisfied on covered projects.
  • Evaluate how allegations and lawsuits might trigger disclosure requirements and factor that into defense considerations.

By taking these proactive steps, contractors can go back to doing what they do best: construction.

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