Georgia Tech Procurement Assistance Center

Executive order: Contractors must allow employees to discuss pay with each other

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President Obama’s mandate that federal contractors must let their employees discuss compensation might be minor for most businesses, but the heavy lifting is yet to come.

By itself, the order has a “pretty small impact” on most businesses, said Alan Chvotkin, executive vice president of contractors’ trade group Professional Services Council — especially since it simply prohibits contractors from retaliating against discussions about pay, but doesn’t yet require them to report compensation data.

“Very, very few companies have an affirmative policy that prohibits conversation about pay,” he said, noting that smaller companies are more likely to feel the effects of the order “because of the often close working environment of their employees, whereas larger companies have a larger and often more distributed workforce, even if located in the same building or complex.”

In an attempt to discourage pay discrimination, Obama last week signed an executive order requiring federal contractors to allow employees to discuss their compensation with each other, known as “Non-Retaliation for Disclosure of Compensation Information.” He also signed a memorandum instructing the Labor Department to draw up regulations under which federal contractors would be required to submit compensation data by race and sex.

Once the Labor Department creates those rules — which would be used to ensure compliance with equal pay laws — Chvotkin says he expects contractors to push back. New reporting requirements could force contractors to spend money on new payroll processing systems or on new employees to collect and analyze the data. “Most company payroll systems don’t capture data that way [by sex and race],” he said.

Keep reading this article at: http://www.washingtonpost.com/business/capitalbusiness/executive-order-contractors-must-allow-employees-to-discuss-pay-with-each-other/2014/04/11/04c40e78-bf48-11e3-bcec-b71ee10e9bc3_story.html

OFCCP director says contractors won’t be violated for missing goals

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Republican lawmakers charged that federal contractor benchmark hiring goals for veterans and the disabled burden contractors and amount to quotas, at a Dec. 4, 2013 House Education and Workforce subcommittee on workforce protections hearing.

But Office of Federal Contract Compliance Programs (OFCCP) Director Patricia Shiu told the panel that they are simply goals and contractors can’t be penalized if they don’t meet them as long as they show evidence of trying.

The Labor Department finalized two rules Aug. 27.  They include a new 7 percent hiring goal for people with disabilities and an benchmarking requirement for veteran hiring.  Both rules, which apply to contractors and subcontractors with 50 employees and $50,000 in government contracts, go into effect Feb. 27, 2014.

Keep reading this article at: http://www.fiercegovernment.com/story/ofccp-director-says-contractors-wont-be-violated-missing-goals/2013-12-05

OMB to contractors: Follow Labor guidance on pre-sequester layoff notices

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The Office of Management and Budget Friday reinforced a Labor Department ruling that federal contractors need not issue notices of impending layoffs to employees related to the looming budget sequester. OMB said agencies would cover contractors’ “liability and litigation costs” related to such notices if they follow Labor’s guidelines.

In a memo to senior finance and procurement officials at agencies, Danny Werfel, OMB’s controller, and Joseph Jordan, head of the Office of Federal Procurement Policy, expanded on guidance provided by Labor in July about layoff notices.

In that guidance, Labor officials said contractors should not send warnings of impending layoff notices to their employees in advance of a potential budget sequester in January. Such notices, they said, are not required under the 1988 Worker Adjustment Retraining Notification Act, and in fact are “inconsistent” with the law, according to a policy letter to state workforce agencies issued by Labor officials.

Contractors have expressed concern that the WARN Act, which requires companies to provide 60-day notice to employees of impending mass layoffs, might apply to a budget sequester that could slash federal agencies’ budgets. Labor’s Employment and Training Administration said it does not, largely because it is not clear yet — and may not be clear until the last minute — whether a sequester actually will go into effect.

Keep reading this article at: http://www.govexec.com/contracting/2012/09/omb-contractors-follow-labor-guidance-pre-sequester-layoff-notices/58463/?oref=govexec_today_nl.

Business owner convicted of largest DBE fraud in U.S. history

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The United States Attorney’s Office for the Middle District of Pennsylvania has announced that Joseph W. Nagle, of Deerfield Beach, Florida, was convicted after a four-week jury trial before Senior United States District Court Judge Sylvia H. Rambo in Harrisburg.

Late Thursday, the jury returned a verdict of guilty on 26 of 30 charges in the indictment including conspiracy to defraud the United States Department of Transportation (USDOT) and commit wire and mail fraud, 11 counts of wire fraud, six counts of mail fraud, conspiracy to commit money laundering, and 11 counts of money laundering.

According to the U.S. Department of Transportation, this scheme, which lasted for over 15 years and involved over $136 million in government contracts, is the largest reported Disadvantaged Business Enterprise (DBE) fraud in the nation’s history.

According to United States Attorney Peter J. Smith, Mr. Nagle faces up to five years’ imprisonment on the conspiracy count; up to 20 years’ imprisonment on each of the wire and mail fraud counts; up to 10 years’ imprisonment on the money laundering conspiracy and each of the money laundering counts of conviction; and $250,000 in fines and mandatory restitution on each of the convictions. Nagle was acquitted on four counts of wire fraud. No date has been set for sentencing.

Mr. Nagle was president, chief executive fficer and part-owner of Schuylkill Products Inc. (SPI) and its wholly-owned subsidiary CDS Engineers Inc. (CDS) until April 2009, when SPI was sold. SPI was based in Cressona, Pennsylvania and manufactured concrete bridge beams used on highway construction projects in Pennsylvania and surrounding states. CDS was SPI’s erection division and installed SPI’s bridge beams, as well as other suppliers’ products, on highways in Pennsylvania and surrounding states. Mr. Nagle was convicted of joining an on-going 15-year conspiracy to defraud USDOT, the Pennsylvania Department of Transportation (PennDOT), and the Southeastern Pennsylvania Transportation Authority (SEPTA) in connection with the federal government’s DBE program when he became president in April 2004.

USDOT provides billions of dollars a year to states and municipalities for the construction and maintenance of highways and mass transit systems on the condition that small businesses, owned and operated by disadvantaged individuals, receive a fair share of these federal funds. In Pennsylvania, PennDOT and SEPTA receive these funds and they require contractors to award a percentage of their subcontracts to eligible DBEs.

Mr. Nagle was convicted of participating in the scheme, which ran from 1993 to 2008, where he and other executives at SPI diverted over 300 PennDOT and SEPTA construction contracts to SPI and CDS that were reserved for DBEs. Mr. Nagle and his co-conspirators executed the scheme by using a small Connecticut highway construction firm known as Marikina Construction Corporation as a front company to obtain these lucrative government contracts.

Marikina was owned by Romeo P. Cruz, of West Haven, Connecticut, a naturalized American citizen born in the Philippines. Marikina was certified by PennDOT and SEPTA as a DBE. Although Marikina received the DBE contracts on paper, all the work was performed by SPI and CDS personnel, and SPI and CDS received all the profits. In exchange for letting SPI and CDS use its name, Marikina was paid a small fixed-fee, set by SPI.

The scheme was carried out for over 15 years because of the numerous fraudulent steps the co-conspirators took to conceal the scheme. SPI and CDS personnel routinely pretended to be Marikina employees by using Marikina business cards, e-mail addresses, stationery, and signature stamps, as well as using magnetic placards and decals bearing the Marikina logo to cover up SPI and CDS logos on SPI and CDS vehicles.

Previously, four former executives associated with SPI, CDS, and Marikina entered guilty pleas for their roles in the scheme:

Romeo P. Cruz, the former owner of Marikina, pleaded guilty to conspiracy and tax fraud charges in 2008 and 2009. Ernest G. Fink, of Orwigsburg, Pennsylvania, SPI’s former vice-president, chief operating officer, and owner, pleaded guilty to conspiracy in 2010. Timothy G. Hubler, of Ashland, Pennsylvania, CDS’ former vice-president in charge of field operations, pleaded guilty to conspiracy and tax fraud charges in 2008. Dennis F. Campbell, of Orwigsburg, Pennsylvania, SPI’s former vice-president in charge of sales and marketing pleaded guilty to conspiracy charges in 2008. All four testified during the Nagle trial and await sentencing.

“Preventing and detecting DBE fraud are priorities for the Secretary of Transportation and the USDOT Office of Inspector General,” said Doug Shoemaker, OIG Regional Special Agent in Charge. “This significant conviction, in what is the largest reported DBE fraud case in USDOT history, will serve as a clear signal that severe penalties await those who would attempt to subvert USDOT laws and regulations. Prime contractors and subcontractors are cautioned not to engage in fraudulent DBE activity and are encouraged to report any suspected DBE fraud to the USDOT-OIG. Our agents will continue to work with the Secretary of Transportation, the Administrators of the Federal Highway and Transit Administrations, and our law enforcement and prosecutorial colleagues to expose and shut down DBE fraud schemes throughout Pennsylvania and the United States.”

“Schemes to defraud the Department of Transportation’s Disadvantaged Business Enterprise program cheat not only the government and taxpayers, but also cheat those small, minority-owned businesses that the program is intended to help,” said Special Agent in Charge George C. Venizelos of the Philadelphia Division of the FBI. “This long-term joint investigation, culminating in the conviction announced here today, shows our determination to work together with our partners to safeguard the taxpayer dollars that support these important programs.”

The investigation was conducted by the FBI, the U.S. Department of Transportation Inspector General’s Office, the U.S. Department of Labor Inspector General’s Office, and the Criminal Investigation Division of the IRS. Senior Litigation Counsel Bruce Brandler and Assistant United States Attorney Kim Douglas Daniel handled the prosecution.

— from an FBI News Release issued Apr. 6, 2012 at http://www.fbi.gov/philadelphia/press-releases/2012/former-president-and-owner-of-schuylkill-products-convicted-in-largest-disadvantaged-business-enterprise-fraud-in-nations-history.

New contract clause and posting requirement for federal contractors

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The U.S. Department of Labor (DOL) Office of Labor-Management Standards on May 20 issued a final rule implementing Executive Order 13496, which requires federal contracting agencies to include in most contracts a new clause requiring contractors and subcontractors to post notices informing employees about their rights under the National Labor Relations Act (“NLRA”).  The rule, which takes effect on June 21, establishes the content of the notice, clarifies flow-down requirements, and sets forth penalties and procedures for noncompliance. It applies only to contracts directly with the federal government and related subcontracts, not to federally assisted contracts made with other nonfederal government entities.

Several changes were made from the proposed rule issued in August 2009, including many made in response to comments submitted by the Associated General Contractors of America (AGC).  For example, DOL adopted AGC’s recommendation to abandon the requirement that government contracts include the entire text of the employee notice – which is quite lengthy – and to allow incorporation by reference.  DOL also expanded the description of unlawful union conduct contained in the text of the employee notice, in response to objections raised by AGC and others that the notice contained an imbalanced list focused on employer misconduct. 

Furthermore, DOL favorably responded to AGC’s concerns that the proposed rule appeared to give DOL improper authority to enforce compliance with the NLRA – which the is role of the National Labor Relations Board – and authorized overly severe sanctions for even minor violations.  While it did not change the text of the final rule on these matters, DOL explained in the preamble that “contractors will not receive harsh sanctions for inadvertent or unintentional violations of the rule.”  The preamble also “assures the contractor community that [DOL] cannot, nor will it, attempt to enforce the substantive provisions of the notice.” 

The executive order and rule exempt prime contracts for purchases below the simplified acquisition threshold (currently $100,000).  However, the proposed rule did not exempt subcontracts below the threshold, and DOL declined to change this in the final rule, despite AGC’s protests.  A subcontract that is below the threshold is covered by the rule, provided that it is “necessary to the performance” of a prime contract above the threshold.  The final rule does, however, add a de minimis standard exempting subcontracts with a value of $10,000 or less.  The rule requires inclusion of the new clause in nonexempt contracts and subcontracts at all tiers, not just first-tier subcontracts, and provides that DOL may require a contractor to enforce subcontractor compliance.  The preamble explains that, while a contractor may not “turn a blind eye toward noncompliance of its subcontractors,” it is only required to seek compliance and will not be liable if the subcontractor still fails to comply.

The rule contains various directives about the manner and location of the posting.  If the contractor posts notices to employees physically, then it must also physically post the NLRA notice.  The posting must be made in “conspicuous places,” including areas (1) where other notices about employment terms and conditions are posted and (2) where employees covered by the NLRA engage in activities related to performance of the government contract.  A noteworthy change for many AGC members in the final rule requires contractors to provide the notice in other languages “where a significant portion of a contractor’s workforce is not proficient in English.”  The rule does not explain what “significant portion” means, but the standard is adopted from rules implementing the Family and Medical Leave Act.  The rule states that DOL will provide an official poster in English and various other languages on its website at www.olms.dol.gov, but, as of publication of this article, only English posters were provided, available in two formats via links at http://www.dol.gov/olms/regs/compliance/EO13496.htm.

If the contractor “customarily” posts notices to employees electronically, then it must also post the NLRA notice electronically by prominently displaying on any website customarily used for employee notices about terms and conditions of employment a link that reads “Important Notice about Employee Rights to Organize and Bargain Collectively with Their Employers” and links to the DOL Web page where the full text of the poster is found.  Again, foreign languages must also be used if a significant portion of the workforce is not English literate, and DOL will provide translations.

Contractors should promptly advise appropriate staff to begin to look for the new contract clause in federal contracts and subcontracts resulting from solicitations issued on or after June 21, and to prepare for compliance.  DOL’s Office of Federal Contract Compliance (OFCCP), which is tasked with conducting compliance evaluations under this rule, has stated in recent months that its enforcement efforts will target the construction industry.  (Click here and here to learn more.)  AGC will meet with OFCCP on May 24 to discuss this and other initiatives.

— Source AGC of America, Human Resource & Labor News, May 24, 2010

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