PilieroMazza’s Weekly Update is an e-mail sent on Fridays that recaps legislative and regulatory issues affecting businesses of all sizes. When government agencies propose significant changes to existing regulations or Congress passes legislation of special interest to the small business community, we follow-up the Weekly Update with an analysis of the proposed change and the likely impact on small business.
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Weekly Report for January 19, 2018
The Government Shutdown Top 10: Things You Should Know Before You Send Employees Home
Engaging Energy: Small Business Resources at the Department of Energy
On Thursday, January 18, 2018, the House Small Business Subcommittee on Agriculture, Energy, and Trade held a hearing, titled “Engaging Energy: Small Business Resources at the Department of Energy.” The purpose of this hearing was to examine the resources available to small businesses in the energy sector through the Department of Energy, and to analyze the effectiveness of these programs at minimizing confusion in the federal contracting process for small businesses.
Weekly Report for January 12, 2018
Pentagon Task Force’s $675 Million in Contracts to Rebuild Afghanistan Found WastefulAccording to an article from Government Executive, the Defense Department’s now-defunct business task force for rebuilding war-torn Afghanistan has again been found to have ineffectively spent its budget, devoting more than half of $675 million in contract obligations to indirect or support costs.
The Special Inspector General for Afghanistan Reconstruction on Tuesday released its latest critique of the Pentagon’s Task Force for Business and Stability Operations, which worked from 2010-2014 to hire companies to help the Afghan people with economic development in such areas as mining, irrigation and banking.That body was disbanded in 2015, with many of its projects incomplete or turned over to the State Department and the U.S. Agency for International Development.
The latest Investigator General findings show that of more than $675 million the unit obligated to contracts, less than half was spent “directly on projects” in Afghanistan, going instead to support services.Only 22 percent of the $316.3 million obligated on contracts for direct support “fully met their deliverables,” the report showed. As many as 43 of the 89 contracts reviewed, together worth $201 million, “used limited competition and sole-source contracting, increasing the government’s risk of waste,” auditors noted.
According to Senator Chuck Grassley (R-Iowa), the findings of the audit further underline the Defense Department’s failure to get its financial house in order. For more information, visit Govexec.com.
Revise and Streamline VA Acquisition Regulation To Adhere to Federal Acquisition Regulation Principles (VAAR Case 2014-V005-Parts 812, 813)The Department of Veterans Affairs (VA) is proposing to amend and update its VA Acquisition Regulation (VAAR) in phased increments to revise or remove any policy superseded by changes in the Federal Acquisition Regulation (FAR), to remove procedural guidance internal to VA into the VAAM, and to incorporate any new agency specific regulations or policies.These changes seek to streamline and align the VAAR with the FAR and remove outdated and duplicative requirements and reduce burden on contractors. The VAAM incorporates portions of the removed VAAR as well as other internal agency acquisition policy.VA will rewrite certain parts of the VAAR and VAAM, and as VAAR parts are rewritten, will publish them in the Federal Register. To minimize the number of rules published, VA will combine related topics.
LABOR AND EMPLOYMENT
States Act To Quell Harassment As #MeToo Momentum SurgesAccording to an article in Law360, many “blue” states have recently proposed bills that focus on lowering workplace sexual harassment. The bills plan to curb the use of nondisclosure and mandatory arbitration provisions in employment contracts and settlement agreements. Following a series of high-profile scandals and the coalescence of the #MeToo movement, a growing number of state legislatures are proposing bills that would empower victims to come forward, and attorneys expect that trend to pick up steam in 2018.
Congress Likely to Consider Another Short-Term Funding MeasureAccording to an article in Government Executive, House Majority Leader Kevin McCarthy, R-Calif., said Thursday that lawmakers should expect to vote on yet another stopgap measure to fund the government ahead of a January 19 shutdown deadline.
Congress faces the prospect of a government shutdown in eight days, if lawmakers cannot come to an agreement on a spending deal. Furthermore, lawmakers must also act to increase budget caps for defense and non-defense spending, or a sequester will kick-in, in accordance with the 2011 Budget Control Act.
McCarthy believes that a short term solution is required regardless of whether lawmakers come to an agreement on a long-term spending deal before the January 19 deadline, stating: “Legislation will have to be drafted to accompany the long-term deal, and thus even if the agreement is accepted, appropriators will require time to draft the required legislation.” For more, visit Govexec.com.
Intern or Employee? DOL Adopts Courts’ “Primary Beneficiary” Analysis for Determining When Your Unpaid Intern Will Be Deemed an Employee Under the FLSABy Paul Mengel on January 10, 2018
Mr. Mengel’s blog explores how the Department of Labor (“DOL”) and the courts have addressed the question: “Under what set of circumstances does an unpaid intern in the private sector cross the line and become an employee under the Fair Labor Standards Act (“FLSA”) and thus become entitled to compensation?” Since 2010, the DOL has used an inflexible test derived from a 1947 Supreme Court case that articulated a similar test for determining whether railroad brakemen trainees should be deemed employees, whereas the courts have chosen to instead apply a “primary beneficiary” analysis; that is, does the relationship primarily benefit the intern or the employer? To read Mr. Mengel’s full blog, please visit www.pilieromazza.com/blog
New Year, New Certification?By Megan Connor on January 3, 2018
Ms. Connor’s blog discusses why the new year is an optimal time for contractors to review their size/status certifications on SAM.gov. Ms. Connor explains that “A contractor’s representations in the SAM database qualify as certifications upon which federal agencies and prime contractors may rely. An inaccurate certification on SAM could lead to a protest by the SBA or liability under the False Claims Act. Therefore, it is vital that contractors keep these certifications up-to-date.” To find out exactly why the new year is a prime time to review these certifications, please visit www.pilieromazza.com/blog
Weekly Report for December 22, 2017
LABOR AND EMPLOYMENT
In 2014, the U.S. Department of Labor (“DOL”) Wage and Hour Division launched an aggressive enforcement initiative aimed at ensuring companies in the restaurant and food service industry comply with the federal minimum wage, overtime, and record-keeping requirements of the Fair Labor Standards Act (“FLSA”). Plaintiff-side employment lawyers took note immediately and began advertising to their target audience. It is not surprising, therefore, that servers, bartenders, and seasonal or event staff have advanced employee complaints based on alleged improper wage- and tip-payment practices with increased frequency, exposing the restaurant industry’s unique vulnerability to the complex and nuanced requirements of the statute.
Department of Labor Seeks to Loosen Reins on Restaurant Industry By Rescinding Regulation of Certain Tip Pooling Practices
Discussed above is the Department of Labor’s (“DOL”) 2011 Regulation related to restaurant tip distribution practices and its journey to the U.S. Supreme Court. The regulation in question announced broadly that “[t]ips are the property of the employee” and “prohibited [employers] from using an employee’s tips . . . for any reason other than . . . [a]s a credit against its minimum wage obligations to the employee, or in furtherance of a valid tip pool.” What this means is that, under the current DOL regulation, even if a restaurant pays its employees a base hourly wage above the minimum wage (without consideration of tips), the restaurant is still required to distribute all tips among its tipped employees, i.e., servers, bartenders, and other wait staff, but it cannot distribute any tips to back-of-house employees, such as cooks, dishwashers, and janitorial staff.
In the December 5, 2017, edition of the Federal Register, the Wage and Hour Division of the DOL gave public notice of its proposal to rescind portions of its 2011 regulations. Under the proposed rulemaking, specifically, the DOL seeks to lift the requirement that all tips be distributed to regularly tipped employees and to consider whether it should rescind the prohibition on restaurants distributing tips to back-of-house employees, such as kitchen employees and dishwashers, so long as all employees of the restaurant receive base hourly rates of pay of at least the minimum wage.
The practical application of the DOL’s proposed new rulemaking, if adopted, is that restaurants that pay all of their employees a base hourly rate above the minimum wage could reach agreement with their employees to distribute a tip pool among a larger group of employees, essentially providing a pay raise to traditionally-lower-paid—yet critical—back-of-house members of a restaurant’s staff that do not customarily receive tips under the present DOL regulation. Notably, the proposed rulemaking would have no effect on restaurants that elect to take a tip credit when paying their employees, i.e., where a restaurant pays a server or bartender a base hourly rate less than the minimum wage (as low as $2.13 per hour) and makes up the difference by distributing tips among employees.
Federal Contractors under Trump Are Offshoring at a Speedy ClipAccording to an article in the Federal Contracts Report, corporate contractors for the government have been “outsourcing” positions at a speedy pace. In the year since Trump’s election, 93,449 jobs have been lost to outsourcing or trade competition, and the top 100 federal contractors have been certified as shipping a record 10,269 American jobs abroad. Of those, four federal contractors each had more than 1000 offshoring-related job losses: General Motors Co., Boeing Co., Pfizer Inc., and United Technologies Corp. For more information see Federal Contracts Report Vol. 108, No. 22, 571.
The 2018 National Defense Authorization Act (“NDAA”), signed last week, made some significant changes to the Small Business Administration’s (“SBA”) Historically Underutilized Business Zone (“HUBZone”) Program. Most of the changes will not take effect until January 1, 2020, but one important change is effective immediately: the current HUBZone maps will be “frozen” and will not change until at least January 1, 2020. This means that areas that currently are designated as HUBZone (or in redesignated status) will remain HUBZones until 2020. Under the 2018 NDAA, SBA is charged with creating a publicly accessible online tool to depict the HUBZones. The current HUBZone areas will remain the same until the new online tool is created – which will be no sooner than January 1, 2020, and potentially longer. The NDAA is not clear about how the new online tool will differ from the current HUBZone map available online, so time will tell what the new online tool will entail. For more information, see our recent blog article.
2018 NDAA Makes Big Changes to HUBZone Program
Veterans Contracting Group, Inc. v. U.S., No. 17-1188C (Dec. 20, 2017): The plaintiff was a CVE-verified SDVOSB and received a USACE contract that was set aside for SDVOSBs. A disappointed offeror filed a protest with SBA, and OHA ultimately determined that the plaintiff did not qualify as an SDVOSB under SBA’s rules and was ineligible for award. The VA then notified the plaintiff that is was being removed from VA’s database. The plaintiff then protested at the Court Of Federal Claims, challenging OHA’s decision. The court began its analysis by walking through the VA’s and SBA’s SDVOSB programs and noting that an anomaly is created by the VA’s regulation (38 CFR 74.2(e)), which provides that a firm in the VIP database that is found ineligible by SBA will be removed from the database, without regard to VA’s eligibility requirements.
RECENTLY ISSUED DECISIONS
As relevant here, OHA had held that the plaintiff was not eligible to bid as an SDVOSB because, in light of the company’s shareholder agreement, the veteran did not unconditionally own the company. Specifically, the shareholders agreement restricted his heirs’ ability to convey or transfer the stock. The court upheld OHA’s decision. In doing so, the court rejected the plaintiff’s arguments, finding that the plaintiff was relying on cases interpreting VA’s regulations, which have a different standard for ownership than SBA uses for SDVOSBs. (https://ecf.cofc.uscourts.gov/cgi-bin/show_public_doc?2017cv1188-34-0)
Veterans Contracting Group, Inc. v. U.S., No. 17-1015C (Dec. 21, 2017): In this case, the plaintiff challenged its removal from the VA database. Specifically, after being removed from the database, it filed a protest related to two SDVOSB procurements that it had been preparing to pursue. The plaintiff argued it should not have been removed from the database. The plaintiff argued that by relying on SBA’s decision, the VA removed the plaintiff without considering the VA’s own regulation (38 CFR 74.22.) The plaintiff also argued that the removal was not supported by the facts. The court held that the VA was required to look beyond the fact that SBA issued an adverse determination before removing an SDVOSB – it needed to look at whether the plaintiff was eligible under the VA’s regulations. The court awarded the plaintiff the bid and proposal costs for the procurement for which it was ineligible to compete (the VA extended the proposal deadline for the other). (https://ecf.cofc.uscourts.gov/cgi-bin/show_public_doc?2017cv1015-62-0)
Weekly Report December 15, 2017
GSA Names 80 Small Businesses to Lead Alliant 2 SB Competition
Senator Shaheen Releases Report on Women’s Entrepreneurship
“House Passes S. 1266, Enhancing Veteran Care Act” House Committee on Veterans’ Affairs Press Release, December 6, 2017. Retrieved from veterans.house.gov
Watchdog Defends Government Use of Lowest-Price IT Contracting
Recently Issued GAO Decisions
Immersion Consulting, LLC, B-415155, B-415155.1 (Dec. 4, 2017): The protester challenged the issuance of a task order under FAR subpart 8.4. Specifically, the protestor challenged the evaluation of quotations and the selection decision. The evaluators assigned strengths and weaknesses to each offeror’s proposal. The evaluators assigned a weakness to the awardee because it found there was a risk the awardee would provide insufficient staffing. However, when the source selection authority (SSA) performed an independent analysis of the evaluation, he removed strengths from both offerors’ proposals and removed the weakness assigned to the awardee, stating that there was no evidence on how it would negatively affect the government. The SSA then concluded that the protester’s and awardee’s proposals were technically equal and selected the lower-priced offeror for award. The protester argued that the SSA’s disagreement with the evaluators was unreasonable and that the proposals were not technically equal. GAO sustained the protest, finding that there was nothing in the record showing what the SSA reviewed to determine the awardee’s staffing did not present a risk. GAO also found the SSA’s removal of strengths assigned to the protester’s proposal was unreasonable because the evaluators had detailed why the protester exceeded the requirements and the SSA failed to justify the removal of the strengths. The full decision can be viewed here.