David Scheffler

Government contractors should take note of the latest changes imposed by President Obama’s administration now that Hilda Solis has been confirmed as the new Secretary of Labor. Many government contractors are now waiting to see what she does with four key pieces of legislation that the President recently signed. 

Lilly Ledbetter Fair Pay Act
The Lilly Ledbetter Fair Pay Act was a direct result of the Supreme Court case Lilly Ledbetter vs. Goodyear Tire & Rubber Company (“Goodyear”). Lilly Ledbetter was a manager in Goodyear’s Gadsden, Alabama plant from 1979 through 1998 when she accepted an early retirement package.  In July of 1998, Lilly Ledbetter filed a charge with the Equal Employment Opportunity Commission (EEOC), alleging that Goodyear. discriminated against her based on gender and as result her pay, at retirement, was disproportionate to her similarly situated male coworkers. 

When the case was brought to the Supreme Court they ruled that the discrimination based on gender had happened in the past and was well outside of the 180-day timely filing period set forth by Title VII.  This resulted in a ruling that recognized that Ledbetter had been discriminated against based on gender in the past but the court could not rule in Ledbetter’s favor because the discrimination did not occur during the 180-day timely filing period. 

The Lilly Ledbetter Fair Pay Act of 2009 (FPA) overturns the previous Supreme Court ruling in Lilly Ledbetter vs. Goodyear.  Under the FPA, the clock for the timely filing period under Title VII resets at each pay check issued where their is a pay disparity based on race, gender, ethnicity, age or disability.  The FPA also places a two year limit on recompensable damages for the affected employees.  To government contractors this means that the OFCCP has the full weight of Title VII to argue their case against any pay disparities that are uncovered during an audit. 

With the implementation of FPA all employers with 15 or more employees should be reviewing their compensation structure under attorney client privilege to determine if any pay disparity is present that can not be explained away.  Once the pay disparity is uncovered it should be immediately addressed so that the timely filing period does not reset at the next pay check.  Organizations that choose not to undergo a self-analysis stand an increased risk in the event of a charge, complaint, or an audit. When pay disparities are uncovered, the EEOC and OFCCP will be seeking two years of back pay for all affected employees.   

Executive Order - Notification of Employee Rights Under Federal Labor Law
The Notification of Employee Rights Under Federal Labor Laws Executive Order removes the Beck Poster requirements and sets forth a yet-to-be defined notice in its place.  The Executive Order gives the Secretary of Labor, Hilda Solis, until the end of May to commence rulemaking to define what will be included in the new notice.  While the exact content of the notice is not yet known, the Executive Order states that the notice will outline certain employee’s rights related to unions.  For the purpose of negotiating the terms and conditions of employment, the notice will express the rights to bargain collectively and to be protected in their exercise of full freedom of association, self-organization and designation of representatives of their choice.

In addition to the notice the Executive Order also requires that all new contracts include four new clauses.  These clauses require the contractor to post the yet-to-be defined notice, comply with provisions, introduce possible penalties for noncompliance and require that subcontracts include the previous three clauses.  The full impact of these clauses will not be known until Hilda Solis commences rulemaking for the notice that will prescribe what is required from the contractor and how the contractor should enforce the requirements on their subcontractors.

Under the Executive Order, if a contractor fails to comply with the notice obligations or related rules, the contractor could have their contract cancelled, terminated, or suspended in whole or in part, and debarred from federal contracts.  Government contractors should take heed that this Executive Order underscores the administration’s support of unions.  If government contractors have not been properly training their managers on the issues around National Labor Relations Act, they could be putting all of their government contracts at risk of debarment. 

Executive Order - Economy in Government Contracting
Under the Executive Order for Economy in Government Contracting, the President created a new unallowable expense item for federal contracts.  Under the Executive Order, any expense related to persuading employees to not join or join a union and bargain collectively are now considered unallowable expenses.  Some examples of union related expenses include, but are not limited to, preparing and distributing materials, hiring or consulting legal counsel or consultants, holding meetings (including paying salary of attendees), and planning or conducting activities by managers supervisors or union representatives during work hours.

All unallowable costs must be excluded from any billing, claim or proposal pursuant to any federal government contract.  The impact to the government contract community could be severe as all government contractors working on a cost-reimbursement basis will need to update their payroll and invoice system to account for any of the new unallowable expenses.  In the event that one of the unallowable expenses is submitted to the federal government and is uncovered in an invoice, the government contractor will be assessed a penalty in an amount equal to two times the amount of the unallowable expense. 

Executive Order - Nondisplacement of Qualified Workers Under Service Contracts
The Nondisplacement of Qualified Workers Under Service Contracts Executive Order forces government contractors that displace a current contractor where similar services are provided in the same location, to offer first right of refusal to the existing employees.  Under the Executive Order, first right of refusal does not have to be offered to the previous management employees but for the remaining employees the first right of refusal must last at least 10 days, prior to announcing an opening to other individuals.  

For government contractors, this means that the incoming contractor no longer has the right to make employment decisions based off merit and performance for the existing employees.  Instead, they must first offer the job to the existing employees and if they choose not to accept, then and only then may the contractor bring in their own employees or recruit new ones.  This could require some employers that are not unionized to start negotiations with the existing employees unions and may cause the new employer to become unionized.

Under the Executive Order, the Secretary of Labor is authorized to use a three year debarment for contractors found in violation of not offering the first right of refusal to existing employees.   This will give the Secretary of Labor the ability to remedy violations without having to use the National Labor Relations Act (NLRA).  All government contractors that provide services where they succeed an existing contractor at the same location should take great caution prior to taking over a new contract.  The repercussions for doing it incorrectly could cost the contractor their business.

If you would like to receive future updates related to recruitment compliance, join our Recruitment Compliance Group on LinkedIn.  Select the following link to join the group: http://www.linkedin.com/e/gis/108929.  There is no fee to join the group or to use LinkedIn