Government Contractor Compliance & Regulatory Update

Trump Administration Proposes Cuts To OFCCP Budget

On February 12, 2018, the Trump Administration released its proposed fiscal year 2019 budget. As it did last year, the budget proposes significant cuts to the funds allocated to OFCCP.

The proposed budget allocates to OFCCP just over $91 million, a decrease of nearly $12.7 million (or 12.5%). The budget also seeks to cut OFCCP’s headcount by 75 full-time equivalents – a reduction of more than 14% from fiscal year 2018.

According to the Administration, its request for reduced OFCCP funds will enable OFCCP to: (1) streamline its desk audit procedures; (2) focus on high-impact systemic compliance evaluations; (3) expand contractor compliance assistance to promote voluntary compliance with nondiscrimination and equal employment opportunity requirements; and (4) modernize the agency’s operational model by, among other things, staffing OFCCP regional offices in closer proportion to the number of contractor establishments in those regions, and establishing Skilled Regional Centers of Excellence. Notably, the proposed budget is silent on a previous proposal to merge OFCCP and the Equal Employment Opportunity Commission. The merger proposal was rejected by Congress last year and appears to be tabled indefinitely at this time.

As always, the President’s proposed budget is just that – a proposal – for Congress to consider as it negotiates and prepares its appropriation bills. We will continue to monitor and report significant developments in the budget process.

2017 EEO-1 Reports Now Available For Submission

Yesterday, the 2017 EEO-1 Survey became available.  Government contractors or subcontractors with 50 or more employees and a contract/subcontract of $50,000 or more must file EEO-1 reports by March 31, 2018.  Please read our post on Law and the Workplace for more details on this year’s reporting requirements.

POTENTIAL GOVERNMENT SHUTDOWN – What Every Government Contractor Needs To Know

Once again, a government shutdown seems inevitable.  During previous government shutdowns, government agencies and departments issued stop-work orders, grinding work on government projects and contracts to a halt.  Contractors were then faced with the difficult task of remaining in compliance with their obligations to their employees while work and funding for those contracts has ceased.

Contractors have been asking for input regarding how to handle employees impacted by the anticipated federal shutdown.  Although the discussion below is not comprehensive, it discusses many of the most significant employment-related issues.

Wage and Hour Considerations

During a shutdown, non-essential government employees are typically furloughed and the federal government need not be concerned with wage and hour legal issues.  Government contractors, on the other hand, must remain mindful of obligations under both federal and state wage and hour laws.  For example, a government contractor that begins a furlough mid-week may consider not paying its employees for the days during that week the employees are on furlough.  However, doing so for employees exempt from overtime under federal and state laws could place their exempt status in jeopardy.

Generally, to be exempt from overtime under the federal Fair Labor Standards Act (“FLSA”), an employee must be paid on a salary basis of at least $455 per week, regardless of the amount of work performed.  Accordingly, while an employer can withhold payment for any full week in which the employee does not work, it cannot do so for any part of a week in which the employee does not work due to a furlough without jeopardizing exempt status.

During previous shutdowns, some government contractors mitigated various wage issues by requiring exempt employees to use vacation pay or paid time off leave (“PTO”) to cover compensation for non-working days during partial furlough weeks.  Although this practice complies with the FLSA’s exemption requirements, contractors must still ensure that they do not run afoul of state wage and hour laws.  For example, some states require employers to comply with their own published leave policies.  Therefore, in such states, employers should review their paid time off policies and applicable laws before mandating the use of vacation time or PTO.

Contractors should instruct employees not to perform any work while on furlough.  If an exempt employee performs work during the week (such as checking and responding to emails), he or she must be paid his or her salary for the entire week.  If a non-exempt employee performs work, he or she must be paid for all work performed.  For this reason, employers should clearly communicate to supervisors and employees that work may not be performed while they are on furlough.  During past shutdowns, some contractors confiscated company-issued smartphones and computing devices to ensure no work was performed.

Another approach contractors have considered during previous shutdowns is requiring exempt employees to work a reduced workweek.  Contractors considering this approach must be mindful of the salary basis implications.  That being said, in limited circumstances it may be permissible to adopt a reduced work-hours program during a period of economic hardship.  The Department of Labor has stated in various opinion letters that “a fixed reduction in salary effective during a period when a company operates a shortened workweek due to economic conditions would be a bona fide reduction not designed to circumvent the salary basis payment. Therefore the exemption would remain in effect as long as the employee receives the minimum salary required by the regulations and meets all the other requirements for the exemption.”  Opinion Letter FLSA2009-18.

Before instituting such a change, however, employers must consider a number of issues, including:  (1) any contractual obligations to employees; (2) state and local notice requirements for changes in compensation; (3) requirements for foreign workers on work authorizations (discussed below) and (4) compliance with other requirements for overtime exemptions (including state requirements).

The WARN Act

The looming government shutdown also brings with it the prospect of furloughing large numbers of employees.  These potential furloughs may implicate the federal Worker Adjustment and Retraining Notification (“WARN”) Act and its state equivalents.  The WARN Act requires, with some exceptions, that employers provide 60 days’ notice to employees affected by a “plant closing” or “mass layoff.”  However, depending on what a government contractor plans to do in response to the shutdown, the WARN Act may not apply.

Historically, some contractors have furloughed workers on suspended projects until they are resumed.  The WARN Act only applies if there is an “employment loss,” which is defined as: (1) an employment termination; (2) a layoff exceeding six months; or (3) a reduction in an employee’s hours of work of more than 50 percent in each month of a six-month period.  Because it is not anticipated that a government shutdown will exceed six months, for most government contractors the WARN Act will not apply.  In the unlikely event that the government shutdown continues for more than four months, contractors will have to consider whether to provide the notices required under the WARN Act.

However, even if the WARN Act does not apply to a government contractor’s furlough program, contractors should be aware that analogous state laws may be triggered by their furloughs.


Government contractors are required to utilize the Internet-based employment verification system called E-Verify to confirm the employment eligibility of their new hires and current employees.  The website, which is administered by the Department of Homeland Security, has historically been unavailable during government shutdowns.

If this is the case again, government contractors should complete I-9 paperwork in an accurate and timely fashion while E-Verify is unavailable.  In addition, if an employee has received a “Tentative Non-Confirmation” notice from E-Verify, he or she likely will not be able to resolve the issue during the shutdown.  If that is the case, the deadline for responding to the Tentative Non-Confirmation will likely be extended for the duration of the shutdown.  During this period, the employer should not take any adverse action against the employee as a result of the notice.

Foreign Workers

A government shutdown can have major implications for foreign workers working in the United States on visas.  When employers sponsor foreign workers under H-1B, H-2B and E-3 visas, they are required to pay the rate set forth in the labor condition applications certified by the Department of Labor.

Given that the government contractor’s only alternative to paying furloughed foreign workers is to terminate their employment – resulting in the employees having to leave the United States – the employer is faced with two undesirable options:  pay the furloughed foreign workers even though they are not paying their American counterparts, or terminate them and lose the knowledge and expertise that will be needed once work resumes on the contract.  The option the government contractor chooses is ultimately a business decision that should be made after analyzing the specific legal requirements.

Benefits Issues

If a government shutdown lasts longer than anticipated, there may also be certain benefits implications for furloughed employees.  First, reduction in employees’ hours may cause some employees to lose coverage under the terms of the employer’s COBRA-covered health plans.  In this case, employers are required to send out qualifying event notices to impacted employees.  The employees and dependents must be offered the ability to continue coverage under these plans during the period of the furlough (up to the maximum COBRA continuation period) at their own expense.  If a furloughed employee is later terminated, the termination generally will not be considered a second qualifying event that would entitle the employee to an extension of the COBRA continuation period.

Unemployment Benefits

Government contractors should also be aware that furloughing their employees may make the employee eligible for unemployment benefits.  Contractors should consult their state laws to determine the impact of furloughs on unemployment benefits.


A government shutdown would require many government contractors to make difficult choices.  If there is a government shut-down, government contractors should consult with employment counsel familiar with government contracting requirements to ensure that short-term solutions to the shutdown do not result in costly legal liabilities.

Proskauer Publishes Article on State Salary History Bans

Connie Bertram and Emilie Adams published an article in the November/December issue of OFCCP Digest titled “States and Localities Step into the Breach on Pay Equity: New and Proposed Prohibitions on the Disclosure of Salary History.” The article focuses on recent laws passed by states and localities prohibiting employers from asking job applicants about their compensation histories in making and negotiating salary offers. The California law also requires employers to provide salary ranges upon request. As discussed in more detail in the article, the laws seek to prevent employers from inadvertently perpetuating historical pay disparities between male and female workers. Connie and Emilie’s article also provides a number of helpful “do’s and don’ts” for employers to keep in mind, including proactive recruiting and hiring practices employers can adopt now to ensure compliance with salary history bans and avoid future liability.

You can find an updated version of the article here.

You can find Proskauer’s previous posts on the various state and local salary history bans that have passed (or nearly passed), including those passed (or nearly passed) in Massachusetts, New York City, San Francisco, Oregon, California, and Illinois, on Proskauer’s Law and the Workplace blog.

OFCCP Settles Hiring Discrimination Case with LandCare USA, LLC

The Austin, Texas location of LandCare USA, LLC (the “Company”), a company providing landscaping services, recently entered into a conciliation agreement with the Office of Federal Contractor Compliance Programs (“OFCCP”) to settle claims that the Company had discriminated in its hiring of females, and non-Hispanic applicants in its Laborer job group.  The Company has agreed to pay $100,000 in back pay to 361 affected class members and also to offer employment to 45 eligible class members of whom 12 are white, 15 are black and 9 are female.

Notably, the Company is no longer a covered federal contractor or subcontractor.  To address this fact, certain of the terms of the conciliation agreement only apply if the Company becomes a covered contractor again in the future.  For example, the conciliation agreement states that if the Company becomes a covered contractor the Company will revise its hiring policies, practices and procedures for the Laborer position.

This is the second conciliation agreement that the Company has entered into with the OFCCP in recent months.  In October, the Las Vegas, Nevada location of the Company entered into a conciliation agreement with OFCCP.  In that agreement, it agreed to pay $161,899 in backpay for alleged discrimination against non-Hispanic applicants for the Laborer Non-Driver position.  The Company also agreed to offer employment to eligible class members until 29 class members were hired into the Laborer Non-Driver positions.

OFCCP Appoints New Director (Not Craig Leen)

Two weeks after reports emerged that a new director of the Office of Federal Contractor Compliance Programs (“OFCCP”) had been appointed, according to the OFCCP’s website, Ondray T. Harris has been appointed as the next director of the OFCCP.  The OFCCP’s website lists former Acting Director Thomas Dowd as the Deputy Director of the agency, while Craig Leen, who was previously reported to have been appointed the OFCCP’s director, is listed as the agency’s Senior Advisor.

According to his LinkedIn page, Director Harris is has a long history of government service.  He began his career as an Assistant Attorney General for Virginia.  He then moved to private practice as a management-side labor and employment attorney.  He joined to the U.S. Department of Justice (“DOJ”) as the Deputy Chief of Employment Litigation in 2005.  He held that position until May 2007.  He later served for three years as the Director of the DOJ’s Community Relations Service.  Subsequently, Mr. Harris was appointed the Executive Director of the Washington, DC Public Employee Relations Board.  He resigned from that position in 2013.  Before joining the Department of Labor earlier this year as Senior Advisor, Mr. Harris worked as a consultant and legal advisor.

It is too early to tell what Director Harris’ appointment means for the direction of the OFCCP.  However, now that the Trump Administration has chosen its first OFCCP Director, it is likely changes are coming.  We will continue to monitor and report developments.

Reports: Craig Leen’s Appointment As OFCCP Director Remains Uncertain

As we previously reported, various media outlets reported earlier this month that Coral Gables City Attorney, Craig Leen, would be appointed Director of the Office of Federal Contractor Compliance Programs (“OFCCP”).  These reports came amid silence by the Trump administration as to the anticipated appointment.

Since our last post, the confusion over Mr. Leen’s role in the Trump administration has only grown as there has still been no official announcement of Mr. Leen’s appointment.  On November 27, 2017, Bloomberg reported that the OFCCP stated that Mr. Leen was working for OFCCP as a “senior advisor.”  No additional details were released regarding his role.

The OFCCP has now been without a Director for thirteen months.  Some have speculated that the difficulty in finding an OFCCP Director may be tied to the efforts to merge the OFCCP into the U.S. Equal Employment Opportunity Commission and/or to cut its budget substantially.  Regardless of the reasoning for the delay, the absence of an OFCCP Director leaves the government contracting community with little guidance regarding the future of the OFCCP’s enforcement efforts and compliance priorities.

Stay tuned for additional developments.

Reports: New OFCCP Director Appointed

According to multiple sources, on November 13, 2017, Craig E. Leen, was appointed the new Director of the Office of Federal Contractor Compliance Programs (“OFCCP”).  Mr. Leen has been the City Attorney for Coral Gables, Florida since 2011.  He has also served as an adjunct professor of law for universities in Florida.  If the published reports are correct, Mr. Leen will replace Thomas M. Dowd, who has been serving as OFCCP Acting Director since November 7, 2016.

There is little in Mr. Leen’s background to gauge how his appointment will impact OFCCP.  Based on publicly available information, it is unclear whether Mr. Leen has much, if any, experience with matters falling within the OFCCP’s jurisdiction.  From published reports, it appears Mr. Leen’s appointment may be due in part to his relationship with Secretary of Labor Alexander Acosta.  According to the Miami Herald, Secretary Acosta called Mr. Leen several months ago and asked him to come and work with him in Washington, DC.  Although we do not know how Secretary Acosta and Mr. Leen know each other, Mr. Leen taught as an adjunct professor at Florida International University College of Law when Secretary Acosta was the Dean.

For nearly 10 months, government contractors have been waiting to see what changes might come to OFCCP as a result of President’s Trump election.  With the appointment of Mr. Leen, the new(ish) Administration will have a new Director to guide OFCCP and presumably institute changes reflecting the Trump Administration’s priorities for the Office.

OFCCP Files Its First Complaint Against A Federal Contractor During the Trump Administration

On October 10, 2017, the U.S. Office of Federal Contractor Compliance Programs (“OFCCP”) filed its first Complaint against a federal contractor since President Trump took office. The Complaint alleges that contractor Advance 2000 Inc. (the “Contractor”) violated a June 2015 conciliation agreement with OFCCP by failing to submit required progress reports and failing to respond to OFCCP’s notice of violation.

The Complaint is significant in that it is the first action brought by the OFCCP against a federal contractor since President Trump took office. That being said, the Complaint does little to illuminate the administrative enforcement priorities of the Trump OFCCP. The Complaint addresses the failure of a contractor to comply with its conciliation agreement obligations – a matter that would likely be pursued no matter who occupied the White House. Thus, it still remains to be seen what the OFCCP’s enforcement priorities will be under the Trump Administration.  Those will likely not be evident until after the new Solicitor of Labor is confirmed. President Trump has nominated Kate O‘Scannlain, a partner at Kirkland & Ellis LLP, for the post, but her nomination is still pending Senate confirmation.

Even so, the Complaint does highlight another common issue in the government contracting sector – namely, the tendency of high compliance costs to discourage small businesses from government contracting. Advance 2000 appears to be a small business, with relatively modest government contracts of approximately $158,000. In an interview with Bloomberg, the CEO of Advance 2000 noted that the Contractor did not intend to seek future government contracts due to the narrow margins and the excessive costs and burdens of compliance.

The government has historically encouraged small businesses, which often include minority- and women-owned businesses, to participate in government contracting. However, the personnel and financial burdens of complying often favor larger institutional government contractors, which already have a substantial compliance program in place. Thus, small contractors are often at a disadvantage when entering the government contracting sector.

The issue is even more acute when considered in light of the low thresholds attaching to various compliance obligations. The most burdensome compliance obligations attach when a contractor with 50 or more employees has a contract of $50,000 or more – with additional obligations attaching when a contractor has a contract of $150,000 or more. Contracts of $50,000 and $150,000 are not significant sums of money, especially given that such contracts often yield narrow profit margins. As such, contractors are forced to incur substantial additional expenses to meet compliance obligations, where the profit margin for those contracts is already slim.

Sanctions Award Strengthens Fight to Protect Confidential Company Records

On October 18, 2017, a federal district judge in Alaska ordered a former employee to pay nearly $170,000 of his ex-employer’s legal fees as sanction for removing nine attorney-client privileged documents prior to his termination. The ruling was based on a decision this summer that the former employee willfully and deliberately disobeyed established norms of litigation conduct when he took, and then used in litigation, the nine privileged documents. In his decision over the summer, however, Judge Holland stopped short of dismissing the former employee’s claims, finding monetary sanctions adequate to address the conduct. Read the full post on Proskauer’s  Whistleblower Defense blog.