Defense Appropriations "Wage Theft" Amendment May Bar Employers with FLSA Violations from Defense Contracts

by Franczek Radelet P.C.
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Late last month, the Senate referred the Fiscal Year 2015 Defense Appropriations Act to the Senate Committee on Appropriations for consideration. The House of Representatives passed its version (H.R. 4870) on June 20 with substantial bipartisan support, 340-73, after considering 80 different amendments. Since this is a wage and hour blog, you can safely assume that I am not telling you about this just so I can link to the cool beta version of the bill tracker at Congress.gov. Of course, you also read the headline, so you know the House version of the bill currently contains a scary provision for many federal contractors.

The day before the House passed the Act, it narrowly approved (by just 212-204) the inclusion of an amendment (H.Amdt. 926) by Minnesota Democrat Keith Ellison that would prohibit the Department of Defense from using contractors with Fair Labor Standards Act (FLSA) “violations” within the past five years. Under the amendment, the term “violations” means more than just findings of fault and liability in civil, criminal, or administrative proceedings, but also entering into wage and hour conciliation agreements or consent decrees that include a “finding of fault.”

The brief amendment reads:

Sec. __. None of the funds made available in this Act may be used to enter into a contract with any person whose disclosures of a proceeding with a disposition listed in section 2313(c)(1) of title 41, United States Code, in the Federal Awardee Performance and Integrity Information System [FAPIIS] include the term “Fair Labor Standards Act.”

For those unfamiliar with FAPIIS, it is a database that has been established to track contractor misconduct and performance in connection with federal contracts, such as criminal, civil, and administrative proceedings in connection with federal awards; suspensions and debarments; contracts terminated for fault; and performance evaluations.

The “dispositions” referred to in the amendment and listed in section 2313(c)(1)(A)-(D) include:

(A) In a criminal proceeding, a conviction.

(B) In a civil proceeding, a finding of fault and liability that results in the payment of a monetary fine, penalty, reimbursement, restitution, or damages of $5,000 or more.

(C) In an administrative proceeding, a finding of fault and liability that results in—

(i) the payment of a monetary fine or penalty of $5,000 or more; or

(ii) the payment of a reimbursement, restitution, or damages in excess of $100,000.

(D) To the maximum extent practicable and consistent with applicable laws and regulations, in a criminal, civil, or administrative proceeding, a disposition of the matter by consent or compromise with an acknowledgment of fault by the person if the proceeding could have led to any of the outcomes specified in subparagraph (A), (B), or (C).

In his remarks introducing the amendment, Rep. Ellison explained that the purpose of the amendment is to guarantee: “if there is a Federal contractor who has been found to engage in wage theft, that they may not benefit from this appropriation.” In his comments, Rep. Ellison relied on a report issued by Democrats on the Senate Committee on Health, Education, Labor, and Pensions finding that “32 percent…of the largest Department of Labor penalties for wage theft were levied against Federal contractors.” Rep. Ellison did not explain his definition of “wage theft” and the categories in the FAPIIS certainly encompass more than just “wage theft” (I put the term in quotes because it is both misleading and loaded). Interestingly, a similar “wage theft” measure failed in the House when proposed as an amendment to the funding bill for commerce, justice and science.

Whether this provision will survive in the final bill is not clear. The Senate Appropriations Committee has not marked up its own version of the bill. The Chamber of Commerce’s last minute lobbying efforts failed in the House, but its lobbyist explained that the Chamber “opposes efforts to add any provision similar to and including an amendment by Rep. Ellison that would prevent contractors found to have violated the Fair Labor Standards Act (FLSA) from continuing to receive federal contracts.” The Associated Builders and Contractors claimed in its own letter that the Ellison amendment was a “job killer” and would create a “blacklist” for federal contractors. The Society of Human Resource Management, the HR Policy Association and the Associated General Contractors of America have also signaled their opposition.

Federal contractors should monitor the progress of the appropriations bill and take careful notice of the consequences if the Ellison amendment becomes law. Not only will FLSA compliance take on even greater importance, but the amendment’s text may well give federal contractors additional impetus to avoid litigating FLSA matters at all, even in close or arguably “winnable” cases, for fear of losing their federal contracts.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Franczek Radelet P.C. | Attorney Advertising

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