New Hiring Obligations for Federal Service Contractors Effective January 18, 2013
Although it’s almost been four years since it was issued in January 2009, Executive Order 13495, known as “Nondisplacement of Qualified Workers Under Service Contracts” (74 Fed. Reg. 6103) has not had much impact upon government contracting employers. That is about to change as the final rule and regulations that will make Executive Order 13495 enforceable go into effective January 18, 2013.
What Executive Order 13496 Says
Executive Order 13495 requires most federal service contractors (including subcontractors)under a contract that succeeds a contract for performance of the same or similar services at the same location to offer the predecessor contractor’s employees a right of first refusal of employment under the contract for those positions for which they qualify. The requirement imposed by the Executive Order does not require a successor contractor to hire all of its predecessor’s employees. Successor contractors may still reduce the size of the workforce and give first preference to certain members of its own workforce (those employees that have worked for the successor contractor for at least three months and face layoff if they are not employed on the new contract). Certain contracts are exempt from this hiring obligation and waivers may be granted by senior procurement executives in limited circumstances.
But, the purported overall goal of this new contracting requirement was to ensure a larger carryover workforce so that there is less disruption to the delivery of services during the period of transition between contractors. The new requirement is also intended to provide the Federal Government with the benefit of an experienced and trained workforce that is familiar with the Federal Government’s personnel, facilities, and requirements. As acknowledged in the Executive Order, it is already quite common for a successor contractor or its subcontractor to hire the majority of the predecessor’s employees when a service contract ends and the work is taken over from one contractor to another. But, there have been occasions where a whole new workforce has been hired, thus displacing all of the predecessor’s employees. The Executive Order was issued to end such practices – and it was undoubtedly coincidental that the Executive Order had effect of virtually ensuring that the new contractor is a “successor” for labor law purposes, thus requiring the new contractor to bargain with the union representing the predecessor contractor’s employees.
Why Did It Take So Long?
While the Executive Order was issued in 2009, it did not become immediately effective. Instead, implementation of the requirement imposed by the Executive Order was passed along to the Department of Labor (DOL). More than two years later, on August 29, 2011, DOL’s Wage and Hour Division published its final rule implementing the Executive Order. However, DOL stated that the final rule would not take effect until the Federal Acquisition Regulatory Council (the FAR Council) issued regulations to amend the Federal Acquisition Regulation. A proposed rule was published on May 3, 2012 (at 77 Fed. Reg. 26232) and several agencies and interested parties responded with comments and questions.
Since then, employers in the government contracting world have been waiting with anticipation for the FAR Council to issue its final regulations. The final regulation and amendment to the FAR (new subpart FAR 22.22 and new clause at FAR 52.222-17) finally issued on December 21, 2012 (77 Fed. Reg. 75766). This final rule will become effective January 18, 2013 and apply to solicitations issued on that date and thereafter. The final rule and amendments to the FAR address various comments submitted and questions raised after the DOL’s final rule issued in August 2011 and the FAR Council’s proposed rule was issued in May 2012. The responses to the comments and questions are helpful in understanding how this new hiring requirement impacts both successor and predecessor contractors and how successor contractors should address certain issues that may arise during their efforts to comply with the new requirement.
Now That It’s Here Employers Need To Get Ready!
Given that January 18th is right around the corner, employers covered by the final rule should immediately evaluate what, if any, obligations they may have moving forward and take any steps necessary to ensure timely compliance with the final rule. The DOL and Federal Register provide some helpful info on the basic nuts and bolts of the new requirements, including a sample notice. Employers may also want to consult with their outside legal counsel to ensure all compliance requirements are met.
Seasons' Greetings From The California Legislature--New Laws That Apply To Employers In January 2012
The California legislature has done plenty this year to leave in employers' stockings for the holidays--new employment laws that will become effective January 1, 2012. In addition to the new California Transparency in Supply Chains Act we blogged about earlier, after some eggnog and holiday cheer, employers will need to be aware of new legal obligations that will kick in as we kick off 2012. Here are the highlights.
“Anti-Wage Theft” Law (AB 469). The Wage Theft Prevention Act of 2011 requires employers to provide non-exempt employees, at the time of hiring, a notice specifying the employee’s rate or rates of pay and the basis on which the employee’s wages are to be calculated (such as hourly, daily, piece, salary, commission, etc.). The notice must also include applicable overtime rates, allowances (if any) claimed as part of the minimum wage, the employer’s designated regular payday, the name of the employer (including any “doing business as” names), the employer’s physical and mailing addresses, and contact information for the employer’s workers’ compensation carrier. The Act also requires the employer to notify employees in writing of any changes made to any of this information within seven days of the implementation of such changes, unless the changes are reflected on a timely wage statement or other writing required by law. The Act adds an element of criminal liability by providing that any employer who willfully fails to pay wage-related Labor Commissioner orders or court judgments is guilty of a misdemeanor.
Independent Contractors (SB 459). This new law cracks down on employers who misclassify their employees as independent contractors by imposing a fine of between $5,000 and $25,000 for “willfully” misclassifying a worker as an independent contractor. “Willful misclassification” means avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor. The law also imposes joint and several liability for a non-attorney consultant to advise an employer to willfully misclassify someone as an independent contractor.
Background Checks (AB 22). This law prohibits most employers from obtaining or relying on consumer credit reports regarding employees or job applicants, except in certain specified limited circumstances. The law does not apply to financial institutions or entities required by law to perform credit checks. Under the new law, employers may still obtain and rely upon credit reports for managerial employees covered by the executive exemption.
Pregnancy Disability Leave (AB 592 and SB 299). This law expressly prohibits “interference” with the exercise of any right provided under the California Family Rights Act, or due to disability by pregnancy, childbirth or related medical conditions. In a provision that may prove to be preempted by ERISA, the law also requires employers to maintain and pay for health coverage under a group health plan for any eligible female employee who takes up to four months of leave due to pregnancy, childbirth or a related medical condition in a twelve month period.
Gender Identity and Expression (AB 887). Existing law prohibits discrimination and harassment based on gender. This law expands the definition of “gender” to include both gender identity (how the person sees him or herself) and gender expression (how other people view the person). Under the new law, an employee must be permitted to dress consistent with the employee’s gender identity and expression.
Genetic Information Discrimination (SB 559). Discrimination in hiring or employment based on genetic information is now unlawful under the Fair Employment and Housing Act. Genetic information is defined to include the individual employee’s genetic tests, the genetic tests of the employee’s family members, and the manifestation of a disease or disorder in the employee’s family members.
Commission Agreements (AB 1396). This law requires all contracts for employment involving commissions as a method of payment to be in writing and to set forth a method by which the commissions are required to be computed and paid. The employee must be given a signed copy, and the employer must obtain a signed receipt from each employee. This law does not take effect until January 1, 2013, so employers have a year to prepare for compliance.
Agricultural Labor Relations (SB 126). This law authorizes the California Agricultural Labor Relations Board to certify union elections when employer misconduct affects the outcomes.
Happy Holidays!
Companion Anti-Union Bills Slated to Pass Idaho Legislature
Never shy about taking on unions, especially in a state where organized labor enjoys little support outside the government sector, the Idaho Legislature recently introduced a pair of bills for addition to the state’s existing Right to Work statute.
Senate Bill 1007, named the “Fairness in Contracting Act,” is intended to “promote fairness in bidding and contracting.” This bill provides, among other things, that a “contractor or subcontractor may not directly or indirectly receive a wage subsidy, bid supplement or rebate on behalf of its employees, or provide the same to its employees, the source of which is wages, dues or assessments collected by or on behalf of any labor organization(s), whether or not labeled as dues or assessments.” The proposed measure would also prohibit labor organizations from “directly or indirectly” paying “a wage subsidy or wage rebate to its members in order to directly or indirectly subsidize a contractor or subcontractor, the source of which is wages, dues or assessments collected by or on behalf of its members, whether or not labeled as dues or assessments.” Use of any fund financed by wages collected by or on behalf of any labor organization, whether or not labeled as dues or assessments, to subsidize a contractor or subcontractor doing business in the state of Idaho would be deemed unlawful.
Contractors, including subcontractors, or labor organizations that violate the provisions of this proposed law will be guilty of a misdemeanor and could be fined an amount not to exceed ten thousand dollars ($10,000) for a first offense, twenty-five thousand dollars ($25,000) for a second offense, and one hundred thousand dollars ($100,000) for each and every additional offense.
The legislation would also confer standing on any “interested party,” including a bidder, offeror, contractor, subcontractor or taxpayer, to challenge any bid award, specification, project agreement, controlling document, grant or cooperative agreement in violation of the provisions of the law. If an interested party prevails in a lawsuit challenging the bill, it will be awarded costs and attorney's fees.
A companion bill, Senate Bill 1006 (“The Open Access to Work Act”), introduced at the same time, bars bidders on public works projects from paying a predetermined amount of wages or wage rate; or type, amount or rate of employee benefits. The law does not apply when federal law requires the payment of prevailing or minimum wages to persons working on projects funded in whole or in part by federal funds. A separate provision makes clear that the contractor party cannot be required to enter into an agreement with a labor organization as part of the contract.
Both of these bills were printed and sent to the State Affairs Committee for further action last week. Yesterday, the full Senate considered and voted on SB 1006, approving it by a 27-7 vote. It has now been referred to the Idaho House. SB 1007 on Monday passed the Committee by a 7-2 party line vote, and will soon be taken up by the full Senate.
Although these bills remain at a relatively early stage, questions have been raised about their legality and potential conflict with federal labor law. Stay tuned for more.
