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 March 15, 2019

GOVERNMENT CONTRACTING

The Congressional Research Service issued a report providing an overview of small business contracting. The report describes the various federal programs, requirements, procurement officers, and procurement offices involved in promoting federal contracting and subcontracting with small businesses, small disadvantaged businesses (SDBs), firms participating in the SBA’s “8(a) Program,” Historically Underutilized Business Zone (HUBZone) small businesses, women-owned small businesses (WOSBs), and service-disabled veteran-owned small businesses (SDVOSBs). The report also examines several federal requirements and authorities in promoting contracting and subcontracting with small businesses; discusses the SBA’s oversight and responsibilities concerning the small business goaling program, small business mentor-protégé programs, the 7(j) management and training program, and the surety bond guaranty program; discusses the role of the Office of Small and Disadvantaged Business Utilization (OSDBU) in promoting contracting with small businesses; examines the role and responsibilities of various federal procurement officers in promoting small business contracting opportunities; and concludes with a discussion of the strong bipartisan support for small business contracting programs.

According to Washington Technology, the Department of Homeland Security (DHS) issued a request for information pertaining to its effort to revamp its headquarters IT operations. Among the changes DHS is exploring is a move from the current government-owned, contractor-operated model to a contractor-owned, contractor-operated model. This infrastructure would support 10,500 users and 12,500 assets such as desktops, laptops, thin clients (used as a PC replacement technology to help customers access the virtual desktop or virtualized applications), printers, copiers, servers and video conferencing units. Per Washington Technology, DHS is considering a seven-to-ten year contract for the project. Responses to the RFI are due March 25, 2019.

The Air Force awarded 51 companies contracts with a total initial value of $8.75 million in a matter of minutes at the Inaugural Air Force Pitch Day event held March 6-7, in New York City. Air Force Pitch Day is modeled after commercial investment pitch competitions to deliver a faster, smarter approach to compete for ideas in the accelerating technology ecosystem. The process is a major departure from the lengthy contractual processes typically expected of the military. It focuses on rapidly awarding Phase I Small Business Innovation Research, or SBIR, contracts to companies based on a simpler streamlined evaluation of white papers and in-person presentations. Air Force contracting officials reviewed 417 submissions received during the 30-day application period and then invited 59 businesses to pitch their proposals in person on March 6. Of those, 51 received an initial award of up to $158,000 with initial payment within minutes of their presentations. During the entire week, including Pitch Day, the Air Force awarded 242 SBIR contracts valued at $75 million.

LABOR AND EMPLOYMENT

According to Bloomberg Government, the Department of Labor (DOL) will move forward on a rule that would require stricter financial reporting requirements for labor organizations and their affiliates. The proposal would re-establish a Form T-1, which would require union trusts, and can include a strike fund or apprenticeship programs, to file annual spending reports, is undergoing review by the White House’s Office of Information and Regulatory Affairs (OIRA). OIRA review is the first step of regulatory review before a proposal can be released to the public for comments. With this proposal, which was originally scheduled for a December 2018 publication according to the agency’s fall regulatory agenda, the DOL says it is looking to collect financial information “that historically has largely gone unreported.” It will also bring reporting requirements for labor organizations and their trusts “in line with contemporary expectations for the disclosure of financial information.” According to Bloomberg Government, the proposal was received by OIRA on March 6, 2019.

According to Bloomberg Government, the National Labor Relations Board’s (NLRB) General Counsel, Peter Robb, wants to limit regional directors’ use of subpoenas to get information from companies and unions not cooperating with the agency’s investigations of alleged unfair labor practices against them. In a March 13, 2019 memorandum, General Counsel Robb noted that he seeks the prompt resolution of labor disputes. In order to achieve this objective, he emphasized that charging parties are obligated to promptly meet with the NLRB agent assigned to their charge, and strongly encouraged charging parties to provide their sworn affidavit, provide other witnesses and relevant documents, and submit a complete written account of the facts and statement of their position as soon as possible. If a charged party is significantly uncooperative, the memorandum recommended that Regional Directors who conclude that a complaint could be issued on the evidence available, issue such a complaint and include a footnote noting the significant lack of cooperation rather than issuing an investigative subpoena because the subpoena could “unnecessarily prolong the investigation and impede the prompt resolution of the underlying dispute.” However, a Regional Director’s issuance of a complaint noting the lack of cooperation—even if no investigative subpoenas are issued—is not a substitute for issuing trial subpoenas later in the proceedings. Bloomberg Government commented that speeding up case processing has been one of General Counsel Robb’s chief goals, and he previously directed the NLRB’s regional offices to adopt new protocols intended to reduce the time between receiving a labor charge and disposing of a case.

The Government Accountability Office (GAO) issued a report regarding whistleblower protection and an analysis of the Department of Defense’s (DoD) actions to improve timeliness and safeguard confidentiality. The GAO found that the DoD Office of Inspector General (DoD/IG) and military service offices of inspector general met some but not all fiscal year 2018 timeliness and quality goals for handling whistleblower complaints. For example, DoD/IG met its timeliness goals related to referring complaints to the appropriate agency and the goals related to the quality of investigations. However, about 85% of DoD/IG reprisal and senior official misconduct investigations exceeded statutory and internal timeliness goals. Additionally, even though the IGs have taken steps to safeguard whistleblower information in their information technology systems and applications, employees in all of the IGs were able to access sensitive whistleblower information without a need to know. The GAO made 12 recommendations, including that the IGs take additional actions to improve timeliness, develop additional procedures to protect whistleblower confidentiality, and take steps to further limit IG employee access to sensitive whistleblower information.

The Department of Justice announced that Michelle A. Holt was sentenced to four years in prison for computer fraud and theft of government property in connection with an extensive timekeeping fraud. According to court documents, she was previously employed as a federal employee for the Department of Defense and worked as a secretary for the U.S. Air Force, Air Combat Command, Communication Support Squadron, at Joint Base Langley-Eustis. Ms. Holt was a salaried employee on the General Schedule grade for the federal civilian workforce, and, as such, she was entitled to overtime pay if authorized by her employer, other forms of holiday and annual leave, and premium pay for any federal holidays worked. A law enforcement investigation determined that from December 2001 to July 2018, Ms. Holt falsely claimed over 42,000 hours in unauthorized overtime for hours she did not work, as well as other amounts of unauthorized holiday leave, sick leave, and annual leave, all amounting to losses to the United States of more than $1.4 million. Ms. Holt accomplished the fraud by using another employee’s log-in information without authorization to make manual retroactive adjustments to protected computer time and attendance systems to add overtime, reverse leave taken, and reverse holiday leave.

CYBERSECURITY

Senator Marco Rubio (R-FL), Chairman of the Senate Committee on Small Business and Entrepreneurship, introduced two bills to protect small businesses from cybersecurity threats. The first bill (S.772), co-sponsored by Senator Ben Cardin (D-MD), would require the Small Business Administration (SBA) to develop a cyber strategy, examine its IT system components’ country of origin, and report on breaches, threats, and the SBA’s actions taken to mitigate the same to the House and Senate Small Business Committees. The second (S.771), co-sponsored by Senator Jeanne Shaheen (D-NH), would create a training program for small business development centers (SBDCs) to prepare counselors in cyber planning assistance, require the SBA Administrator to establish a cyber counseling program, and require certain numbers of SBDC employees to be certified in cyber strategy counseling.

PILIEROMAZZA BLOGS

GAO Finds That Federal Agencies Have Made Few SBIR Awards to Small Businesses Majority-Owned by Multiple Venture Capital Operating Companies, Hedge Funds, or Private Equity Firms

By Patrick T. Rothwell

The purposes of the Small Business Innovation Research ("SBIR") program include, among other things, the use of small businesses to meet federally funded R&D needs and the fostering and encouragement of participation by SDBs and WOSBs in technological innovation. Federal agencies with obligations of more than $100 million for extramural R&D activities (that is, R&D conducted by non-federal employees outside of federal facilities) must establish an SBIR program and are required to spend a percentage of their extramural R&D obligations for each year. For fiscal year 2017 and in each fiscal year after, the percentage that must be spent on SBIR awards is 3.2 percent. Each participating agency's SBIR program is surveyed and monitored by SBA.
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Are You Complying with All Applicable Procurement Requirements?

By Julia Di Vito

Entering into contracts with the federal government requires contractors to comply with a significant number of requirements, including statutory, regulatory, and contractual requirements. And, under the False Claims Act, the penalties for failing to comply with those requirements can be steep. In fiscal year 2018, there was a total of $2.88 billion in settlements and judgments in False Claims Act cases. That $2.88 billion includes settlements and judgments for procurement-related fraud cases brought under the False Claims Act.
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Buyer Beware: Outsourcing Labor Puts You at Risk of Prevailing Wage Violations

By Nichole D. Atallah

Recently, a Department of Labor (DOL) investigation found that four federal contractors were responsible for paying 53 current and former employees a total of $255,474 for violating the Davis-Bacon and Related Acts (DBRA). DOL determined the contractors failed to pay the correct prevailing wages and fringe benefits. In this case, the prime contractor subcontracted with a temporary staffing company that failed to pay cleaning service crews in accordance with DBRA requirements. The temporary employees were misclassified and not paid the required prevailing wage rates. Another subcontractor also failed to pay the correct fringe benefits. Due to the repeated and willful nature of these violations, one of the contractors and its owner have been declared ineligible to bid on federal DBRA contracts for a period of 3 years.
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Weekly Report for March 8, 2019

GOVERNMENT CONTRACTING

Gene L. Dodaro, Comptroller General of the United States, testified before the Senate Committee on Homeland Security and Governmental Affairs about the Government Accountability Office’s (GAO) report on high-risk areas. Mr. Dodaro’s testimony explained that the GAO’s high-risk program has focused attention on government operations with greater vulnerabilities to fraud, waste, abuse, and mismanagement, or that are in need of transformation to address economy, efficiency, or effectiveness challenges. The GAO’s 2019 High Risk Report, among other things, identified two new high-risk areas—Government-wide Personnel Security Clearance Process and Department of Veterans Affairs (VA) Acquisition Management. The VA has one of the most significant acquisition functions in the federal government, both in obligations and number of contract actions. The GAO identified seven contracting challenges for VA, such as outdated acquisition regulations and policies, lack of an effective medical supplies procurement strategy, and inadequate acquisition training.

The Department of Defense (DoD) Office of the Undersecretary of Defense released a memorandum that provides additional guidance on the use of Other Transactions (OTs) for prototype projects under 10 U.S.C. § 2371b, with consortia to address the perception that consortium membership needs to be limited to U.S. companies or institutions. OTs for prototype projects are authorized when directly relevant to enhancing the mission effectiveness of military personnel and the supporting platforms, systems, components, or materials proposed to be acquired or developed by the DoD, or to the improvement of platforms, systems, components, or materials in use by the armed forces. Such projects are intended to help broaden the DoD’s ability to access innovative technology from companies that might otherwise be unable or unwilling to enter into contracts with the DoD.

The Department of Justice (DOJ) announced it reached a settlement of its civil forfeiture case against assets owned by Hikmatullah Shadman, which he wrongfully acquired as a government contractor in Afghanistan. Under the terms of the settlement, approximately $25 million will be forfeited to the United States. The civil settlement is part of a global settlement that involved the resolution of a criminal case and False Claims Act allegations. According to the DOJ announcement, Hikmatullah Shadman operated several companies including Hikmat Shadman Logistics Services Company (HSLSC), which served as subcontractors delivering supplies to U.S. service members at various locations in Afghanistan. From November 2010 to March 2012, Mr. Shadman charged the United States more than $77 million for delivering supplies to U.S. service members. The civil forfeiture case targeted, among other things, Mr. Shadman’s fraudulent receipt of a disproportionate number of subcontracts for the transport of military supplies in Afghanistan, as well as the inflated prices that he charged the United States for such transport.


LABOR AND EMPLOYMENT

The Department of Labor (DOL) announced a proposed rule that would make more than a million additional American workers eligible for overtime. This proposed regulation has been submitted to the Office of the Federal Register (OFR) for publication and is currently pending placement on public inspection at the OFR and publication in the Federal Register. Under currently enforced law, employees with a salary below $455 per week ($23,660 annually) must be paid overtime if they work more than 40 hours per week. Workers making at least this salary level may be eligible for overtime based on their job duties. This salary level was set in 2004. This proposal would boost the proposed standard salary level to $679 per week (equivalent to $35,308 per year). Above this salary level, eligibility for overtime varies based on job duties. In developing the proposal, the DOL received extensive public input from six in-person listening sessions held around the nation and more than 200,000 comments that were received as part of a 2017 Request for Information (RFI). Commenters who participated in response to the RFI or who participated at a listening session overwhelmingly agreed that the currently enforced salary and compensation levels need to be updated.

According to Bloomberg Government, the DOL is expected to introduce three proposed rules on overtime pay and joint employer liability in March. Bloomberg Government opined that—in addition to a proposed overtime rule would make workers who earn less than $35,000 a year automatically eligible for time-and-a-half pay for all hours beyond 40 a week—the DOL is expected to amend requirements for calculating workers’ “regular” pay rates for overtime purposes. Third, the DOL reportedly sent a rule to the White House for review that is expected to limit shared liability for affiliated businesses.

The Equal Employment Opportunity Commission (EEOC) will officially open the 2018 EEO-1 survey on March 18, 2019, and the deadline to submit EEO-1 data has been extended until May 31, 2019. All private employers who are subject to Title VII of the Civil Rights Act of 1964 (as amended by the Equal Employment Opportunity Act of 1972) with 100 or more employees—excluding state and local governments, primary and secondary school systems, institutions of higher education, Indian tribes and tax-exempt private membership clubs other than labor organizations—or private employers subject to Title VII who have fewer than 100 employees if the company is owned or affiliated with another company, or there is centralized ownership, control or management (such as central control of personnel policies and labor relations) so that the group legally constitutes a single enterprise, and the entire enterprise employs a total of 100 or more employees, must file the Standard Form 100 (EEO-1). Additionally, all federal contractors who are not exempt as provided in 41 CFR 60-1.5, who have 50 or more employees, and (1) are prime contractors or first-tier subcontractors, and have a contract, subcontract, or purchase order amounting to $50,000 or more, or (2) are federal contractors who serve as a depository of Government funds in any amount, or (3) are federal contractors who are financial institutions which is an issuing and paying agent for U.S. Savings Bonds and Notes must file Standard Form 100 (EEO-1). More information on the EEO-1 Survey can be found here.

According to Bloomberg Government, a new court ruling will require companies with more than 100 employees to report to the U.S. government data about how much workers’ are paid broken down by sex, race, and ethnicity, possibly as soon as this spring. The pay disclosures were finalized by the EEOC in the summer of 2016, but the Office of Management and Budget (OMB) froze the expanded requirements after President Trump took office. The National Women’s Law Center and other groups sued, and on March 4, Judge Tanya Chutkan ruled in their favor, saying that the government did not properly justify its decision. Per Bloomberg Government, the OMB may appeal, and it is not clear whether companies will have to comply by the original May 31 deadline. Employers already submit demographic data to the EEOC annually, but the new disclosures would call for more granular analysis, requiring them to report the racial and gender makeup of employees in each job category (executive level, professionals, sales workers, etc.) within 12 pay ranges, for each of a company’s physical locations.

According to Bloomberg Government, Walmart is eliminating its greeter positions and moving to ones requiring more physical duties, which may set new legal precedents for how a business can adjust its workforce within the limits of the Americans with Disabilities Act (ADA). As noted by Bloomberg Government, at least three complaints have been filed against Walmart in Pennsylvania, Illinois, and Wisconsin over the retail giant’s imposition of an April deadline for phasing out greeter positions as they now exist, according to Cheryl Bates Harris, a senior disability advocacy specialist at the National Disability Rights Network. Elderly and disabled employees who hold many of those positions have been told to reapply for “customer host” positions that, among other things, can require standing for long periods. Walmart declined to elaborate on the specific different job requirements for the new role. According to the article, the change by Walmart offers a unique moment in employment law because discrimination cases under the ADA often arise from actions taken during hiring and firing, not changes in an already filled job, and certainly not on a scale like the Walmart greeter position.

According to Law360, CRST International Inc. agreed to settle an EEOC suit accusing the trucking company of violating the ADA by refusing to hire a military veteran after he asked to use an emotional support dog on the job. The EEOC sued CRST in 2017, alleging that the company declined to hire an applicant for a long-haul truck driver position after he asked to drive with a service dog as per his doctor’s order. According to court documents, the applicant’s psychiatrist had prescribed a service animal to help him cope with post-traumatic stress and “to maintain appropriate social interactions and workplace functions.” On Tuesday, the Court signed off on a consent decree ending the suit. Under the deal, CRST will pay the military veteran $47,500 and train its managerial and recruiting staff on ADA compliance. Leslie N. Carter, a trial attorney for the EEOC’s Milwaukee office who worked on the case, told Law360 on Wednesday that the settlement makes clear that a request for a service animal can be protected by the ADA.

According to Law360, the National Labor Relations Board (NLRB) ruled that unions cannot force workers who object to being full-fledged union members to pay for lobbying activities, saying lobbying falls outside the core representation work that unions can require nonmember objectors to fund. Under the U.S. Supreme Court’s 1988 Communications Workers of America v. Beck decision, unions cannot use funds collected from nonmember employees covered by union-security arrangements for any activities not germane to a union’s core representational duties of collective bargaining, contract administration, and grievance adjustment. The improper use of nonmembers' fees violates unions' duty of fair representation under the Beck framework. In a 3-1 decision, the NLRB majority ruled that unions cannot use fees paid by so-called Beck objectors—workers in a unionized setting who opt not to join the union—for lobbying expenses without running afoul of National Labor Relations Act. Additionally, the NLRB held that a union has to provide workers with independent verification that it has done an audit of what expenses fall under the categories that Beck objectors’ fees can be put toward. The NLRB’s decision can be found here.

CYBERSECURITY

According to Bloomberg Government, there were more than 1,100 reported data breaches over the last 12 months, many of them considered large in terms of the number of individuals impacted and volume of data acquired. Since data breaches can make headlines and engender litigation brought by consumers and financial institutions, Bloomberg Government highlighted four trends that could impact data breach litigation. First, there is a circuit split among the U.S. Circuit Courts of Appeals regarding standing. Per Bloomberg Government, a consensus has been growing among federal courts that plaintiffs alleging actual fraud—e.g., account fraud or identity theft—satisfy the “injury in fact” requirement for standing. But courts have split on whether a plaintiff who has not suffered fraud establishes standing—e.g., by alleging only a “substantial risk” of future harm. Second, Bloomberg Government expects large consumer class action settlements to continue to be the trend in terms of data breach litigation. Two such settlements in 2018 involved Wendy’s and Anthem consumer class action lawsuits, which settled for $3.4 million and $115 million, respectively. Third, Bloomberg Government expects financial-institution plaintiffs to face difficulties after the Seventh Circuit dismissed a complaint brought by a financial institution reasoning that tort law “did not recognize a ‘remedy to card-holders’ banks against a retail merchant who suffered a data breach, above and beyond the remedies provided by the network of contracts that link merchants, card-processors, banks, and card brands to enable electronic card payments.” Lastly, Bloomberg Government believes regulatory enforcement actions to continue to be brought under the FTC Act against companies that suffer data breaches.

According to Bloomberg Government, five senators introduced legislation that would require public companies without cybersecurity experts on their boards of directors to explain in Securities and Exchange Commission filings how other cybersecurity efforts make up for the absence of a cybersecurity expert on the board. Under the bill, (S.592), public companies would also have to tell investors whether any of their directors are cybersecurity experts. Representative Jim Himes (D-Conn) is expected to introduce companion legislation in the House.

PILIEROMAZZA BLOGS

Is Cyber Insurance Worthless in the Age of Quasi-State-Sponsored Hacking?

By Isaias Alba IV

I'm sure everyone has heard it before: commentators, pundits, and even members of the 809 Panel have stated that "we are at war!" Most of these claims revolve less around ground combat or air battles than the fact that more countries are investing in and deploying cyber assets to destroy not just the defense networks of other countries, but their economic systems as well. Thus, it stands to reason that some of the cyber threats seen in the wild are not just from random hackers in basements or dark apartments, but from state actors or quasi-state actors operating directly or indirectly at the behest of governments. Further, there are even more hackers working for terrorist organizations criminal enterprises financially connected to terror organizations, or "lone wolf" actors whose motives some would contend to be "terrorist" in nature. This fact runs headlong into a provision contained in many cyber insurance contracts that state the insurer does not have to pay for incidents caused by an "act of war" or "act of terror." It is this very exclusion that is at play in recent a multi-million dollar lawsuit. Specifically, if the insurance company defendant prevails and more insurers attempt to use this exception to avoid paying for damages caused by malware suspected of being tied to state actors or terrorist organizations, cyber insurance could become virtually worthless. [Read More]




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Weekly Report for March 1, 2019

GOVERNMENT CONTRACTING

The Department of Defense (DoD) updated its list of product categories for which the Federal Prison Industries’ (FPI) share of the DoD market is greater than 5%, as required by statute. The product categories and the products within each of the identified product categories must be procured using competitive procedures in accordance with the Defense Federal Acquisition Regulation Supplement (DFARS) 208.602-70. Contracting officers must consider a timely offer from FPI for any of the product categories on the list when conducting the competition, and FPI must be included even if the procurement would have been a set aside under the Federal Acquisition Regulation (FAR) Part 19. The list that applies to new solicitations and resulting contracts/orders effective as of March 28, 2019 can be found here. The revised list is also posted on the Defense Pricing and Contracting website.

According to Bloomberg Law, the U.S. Court of Federal Claims held that the Transportation Security Administration (TSA) unlawfully overrode an automatic stay of performance that is triggered when a protest is filed. Technica LLC protested the award of a $48 million contract to Aviation Security Management LLC to provide airport security services for the TSA at the Government Accountability Office (GAO). Judge Loren A. Smith explained that allowing TSA’s override of the automatic stay to stand would pull the Competition in Contracting Act’s “teeth from the GAO, rendering it a government body with a bark but no ability to bite,” which was not what Congress intended. “As such, th[e] Court must invalidate the [TSA’s] decision to override the stay.” The full decision can be found here.

According to Law360, the GAO rejected IBM’s claims over an alleged leak of its bid on a $47.8 million IT support deal to Accenture Federal Services, LLC, the company that won the task order, saying that it does not weigh in on disputes between private parties. The decision comes after the government watchdog agency ruled in April that IBM failed to show that the TSA misevaluated bids for the deal. At that time, the GAO advised IBM to wait for the completion of a related TSA investigation before filing its claims over the alleged leak. IBM said that an employee of one of its subcontractors had obtained the company’s bid and other information from a restricted TSA website and passed the information along to Accenture. Following its probe, however, the TSA again selected Accenture, leading IBM to challenge the investigation and the agency’s decision to move forward with the award, the decision said. The GAO dismissed IBM’s allegations that Accenture violated a ban on knowingly obtaining information about a bid, proposal or source selection, according to the decision. The full GAO decision can be found here.


LABOR AND EMPLOYMENT

According to Bloomberg Government, the U.S. Supreme Court remanded a case to the Ninth Circuit Court of Appeals for further determination which asks whether an employer can use an employee’s salary from a prior job as a factor when setting the worker’s starting pay. Per Bloomberg Government, a three-judge panel of the Ninth Circuit ruled in April 2017 that prior salary may be a valid basis for setting pay as long as there is a reasonable business reason, even if it results in a difference in pay between male and female workers. In April 2018, the Ninth Circuit, sitting en banc, vacated the panel ruling and held that using a worker’s prior salary to set pay is not job-related and “perpetuates the very gender-based assumptions about the value of work that the Equal Pay Act was designed to end.” However, the late Judge Stephen Reinhardt authored the Ninth Circuit’s majority opinion but passed away before the Ninth Circuit issued its opinion. The U.S. Supreme Court, in remanding the case, found that because Judge Reinhardt had passed away by the time of the full court’s April 2018 publication of its opinion, his participation was unlawful, and the Ninth Circuit erred in counting him as a member of the majority. As explained by Bloomberg Government, until the Ninth Circuit re-visits the case, the precedent that prior-pay history can be used as a factor other than sex in establishing salary is restored.

According to Law360, the U.S. Supreme Court declined to hear an appeal from In-N-Out Burger in a case regarding the wearing of pro-union buttons. The Court rejected without comment the burger chain’s petition for certiorari after the Fifth Circuit Court of Appeals upheld the National Labor Relations Board’s (NLRB) finding that In-N-Out unfairly barred workers at an Austin, Texas location from wearing buttons supporting the “Fight for $15” campaign to increase minimum wages. In-N-Out reportedly had a “no pins or stickers” rule, but the NLRB found that the rule violated that National Labor Relations Act (NLRA). The Fifth Circuit upheld the NLRB’s ruling and noted that Section 7 of the National Labor Relations Act allows workers to wear pro-union buttons and other paraphernalia, and that the company failed to show that its button ban qualified as the sort of special circumstance that would exempt it from the NLRA's rule. The Fifth Circuit’s decision from July 2018 can be found here.

According to Bloomberg Government, a bill was introduced in the Senate that could lower one of the hurdles workers must overcome to prove that an employer engaged in age or disability discrimination or retaliated against them based on their race, sex, religion, color, or national origin. The bill, titled the “Protecting Older Workers Against Discrimination Act” (S.433), seeks to clarify congressional intent that mixed-motive claims shall be available for age discrimination claims under the Age Discrimination in Employment Act (ADEA) and similar civil rights provisions and clarify that a complaining party does not have to provide that a protected characteristic or protected activity was the “but for” cause of an unlawful employment practice. As explained by Bloomberg Government, courts expanded the application of the but-for standard for employment discrimination claims based on age or retaliation claims after two U.S. Supreme Court decisions. The bill would reject the Supreme Court’s rulings and require courts to use the less-stringent motivating factor framework for ADEA and Title VII retaliation claims, as well as the Americans with Disabilities Act and the Rehabilitation Act.

According to Bloomberg Government, at least 18 states have introduced paid family leave bills in 2019. These states, which are reportedly home to over 90 million Americans, are considering bills that generally provide leave benefits for new parents and for workers dealing with their own serious illnesses or a family member’s serious illness. Although the bills vary somewhat, Bloomberg Government reports that the bills typically grant workers 12 weeks of paid leave at a percentage of annual wages and are funded through a combination of employee and employer payroll deductions. To date, the District of Columbia and six states have passed paid family and medical leave programs—California, Massachusetts, New Jersey, New York, Rhode Island, and Washington. According to Bloomberg Government, paid-leave advocates are watching the bills in Oregon, Connecticut, New Hampshire, Maine, and Virginia, where the bills may progress under the states’ Democratic leadership.

PILIEROMAZZA BLOGS

Small Business Subcontractor Recertifications

By Megan C. Connor

I spoke at the TRI-Association Small Business Advisory Panel (TRIAD) Winter Meeting a couple weeks ago in Nashville, and a number of attendees asked me questions about how often a large prime contractor must require its small business subcontractors to recertify size/status during the term of a subcontract. SBA's regulations and the FAR indicate that a subcontractor's status for a particular subcontract is established at the time the subcontractor submits its offer for the subcontract, and a prime contractor may rely on that representation for the life of the subcontract.
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PilieroMazza Litigation Team Wins Long-Odds Appeal of New York Stock Exchange Delisting Decision

By Pamela J. Mazza

Recently, PilieroMazza had the privilege of representing India Globalization Capital, Inc. (NYSE: IGC) on its appeal of a decision by the New York Stock Exchange ("NYSE American" or "the Exchange") to delist IGC's common stock from trading on the Exchange. Victories in NYSE appeals are rare and extremely difficult to come by, particularly when the Exchange's delisting decision is based on subjective and discretionary criteria. In these types of proceedings, the odds are always stacked against the company. But ultimately, even against those odds, truth wins out; the Exchange's delisting procedures allow for a meaningful presentation of evidence to rebut the decision, and under the right circumstances, a company can be vindicated.
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Weekly Report for February 22, 2019

GOVERNMENT CONTRACTING

The Government Accountability Office (GAO) sustained a protest filed by Ekagra Partners, LLC challenging the terms of a request for proposal (RFP) issued by the General Services Administration (GSA). In its protest, Ekagra Partners argued the solicitation for the OASIS Small Business on-ramp, which included terms that improperly restricted competition by limiting the ways in which a small business joint venture could form teams to submit a proposal. The GAO found that the solicitation’s limitation on the ability of a joint venture to submit a proposal as a contractor team arrangement that relied on the experience of subcontractors that are not members of the joint venture was unduly restrictive of competition. The GAO further concluded that Ekagra Partners was prejudiced by the RFP term because the solicitation prevented it from relying on the experience of proposed subcontractors to enhance its ability to compete for and win an award. The GAO held that if the GSA cannot justify why such a restriction is necessary, it should amend the solicitation to remove the challenged term and request revised proposals.

According to Government Executive, eight House Democrats have asked White House Budget Director and Acting Chief of Staff Mick Mulvaney to reopen some expired comment periods for agency rule-making. The letter, sent to Mr. Mulvaney on February 15, urged him to direct federal agencies to (1) immediately reschedule all canceled public hearings and meetings, (2) reopen comment periods that closed during the shutdown for at least an additional 35 days, and (3) extend the comment periods that were open during the shutdown for at least an additional 35 days. The lawmakers said that the shutdown “significantly harmed the right of the American people to meet with federal agencies and comment on proposed actions.” They further argued that “[p]ublic participation is a hallmark of good governance and a core tenet of administrative law.”

The Department of Defense (DoD) Office of Inspector General (OIG) summarized systemic problems with the contract administration of energy savings performance contracts (ESPCs) as reported in eight Government Accountability Office (GAO), DoD OIG, and U.S. Army Audit Agency (USAAA) reports issued since 2013. The OIG also evaluated whether the DoD, Army, Navy, Air Force, and Defense Logistics Agency officials implemented the recommendations in the eight reports. Overall, the reports found that the government did not know whether it received contractor-claimed energy savings and whether the ESPCs program was cost effective. The full DoD OIG report can be found here.

LABOR AND EMPLOYMENT

According to Bloomberg Government, the U.S. Court of Appeals for the Eight Circuit upheld a city’s decision to deny an employee’s telework request. The employee, Gary Brunckhorst, had a nearly fatal bout with flesh-eating bacteria, causing him to be out of work for the city of Oak Park Heights, Minnesota for nearly a year. It left him with painful leg and foot injuries that limited his mobility. When Mr. Brunckhorst was cleared to return to work, he requested a part-time schedule during his first four months back and wanted to work from home during that time. Oak Park Heights denied his request, and eventually terminated Mr. Brunckhorst’s employment. The Eighth Circuit determined that Mr. Brunckhorst failed to show that he could perform the essential functions of his job while teleworking. As such, working remotely was not a reasonable accommodation for him. Bloomberg Government commented that courts have long been skeptical that working remotely can be a reasonable accommodation for a disability, but judges have grown more open to examining whether physical presence at a job is necessary in particular situations. However, according to Bloomberg Government, plaintiffs challenging a denial of telework accommodations still face a tough court battle. In a Bloomberg Law analysis of cases over the past two years, 70% of employers won on the issue of whether they could reject an employee’s request to work remotely as an accommodation for a disability. But, Carolyn Wheeler, a former assistant general counsel for the Equal Employment Opportunity Commission, told Bloomberg Government that while courts used to simply state that working remotely was not reasonable, end of discussion, courts are now more likely to say that working remotely “could be reasonable, but not in this case.”

According to Law360, a Virginia federal judge blocked the pending discharge of HIV-positive airmen by the Air Force, ruling that the Air Force’s HIV policies were irrational and did not reflect the availability of modern HIV treatments. The airmen sued in December alongside an LGBT service-member advocacy group, OutServe-SLDN Inc., challenging the Department of Defense’s HIV policies. They alleged their pending discharges were arbitrary and capricious under the Administrative Procedure Act and had violated constitutional equal protection requirements. The airmen argued that modern anti-retroviral drugs mean their HIV “viral load” is effectively undetectable and that they are fully capable of carrying out their duties. Despite their arguments that they were fit to serve, Air Force review boards and a representative for the Air Force Secretary recommended their discharge, citing the possibility of “sudden and unpredictable progression” in their conditions that would prevent them from being deployed worldwide. U.S. District Judge Leonie M. Brinkema ruled that the two airmen had shown they are likely to succeed on the merits of their claims that they faced unfair discharges due to their HIV-positive status and granted them and a class of similarly-situated airmen a preliminary injunction. As reported by Law360, Judge Brinkema said that neither airman should have been classified as non-deployable under Air Force policy as written, as they are asymptomatic, and their treatment is straightforward and without significant side effects.

According to Law360, New York City’s Commission on Human Rights put employers on notice that banning or restricting hairstyles that are associated with black people is a form of racial discrimination. Alicia McCauley, the deputy press secretary for the Commission, told Law360 that the law's racial discrimination protections had always been interpreted to include hair. However, a rise in cases concerning hairstyle bias and national news stories around the issue sounded an alarm for the commission. Ms. McCauley said that the Commission issued guidance on the issue because the Commission thought it needed to clarify the law and let victims know they could seek justice through the Commission. The Commission's guidance warns employers that they could find themselves in trouble under New York City's human rights law if they create policies prohibiting or restricting natural hair and hairstyles since those policies disparately affect black people.

PILIEROMAZZA BLOGS

The Contracting Officer Denied My Claim: Is It Time to Appeal?

By Michelle E. Litteken

The Contract Disputes Act ("CDA") was intended to provide a straightforward process for contractors to resolve disputes that occur under a government contract. In short, a contractor may initiate a dispute by submitting a claim to the contracting officer. The contracting officer then issues a final decision, and if the contractor disagrees, it may appeal to a board of contract appeals within 90 days or to the U.S. Court of Federal Claims ("COFC") within one year. Although this path seems clear, questions arise when the process is put into practice. One common question is whether the contracting officer's decision is sufficient to trigger the deadline for the contractor to appeal if the decision is lacking some of the usual formalities. The Civilian Board of Contract Appeals ("CBCA") recently issued a decision that answered that question.
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Weekly Report for February 15, 2019

GOVERNMENT CONTRACTING

The General Services Administration (GSA) implemented a new process in SAM that allows non-federal entity registrants to submit common federal government-wide Representations and Certifications for financial assistance. The procurement Representations and Certifications have not changed. Non-federal entities creating new SAM registrations and existing non-federal entities completing their annual SAM registration renewals will be required to review and certify their financial assistance Certifications and Representations before their registration can be activated. Registration in SAM is required prior to receipt of federal awards and must be updated annually by non-federal entities, therefore federal agencies will use the SAM registration information to verify non-federal entity compliance with application and award requirements. To view instructions on how to submit Representations and Certifications in SAM, please see the user guide.

The Department of Justice announced that the U.S. filed suit against Mission Support Alliance LLC (MSA), Lockheed Martin Corporation (LMC), Lockheed Martin Services Inc. (LMSI), and Jorge Francisco Armijo for alleged false claims and kickbacks in connection with a multi-billion dollar contract with the Department of Energy (DOE) to support the environmental cleanup at the Hanford Site near Richland, Washington. MSA is a Delaware Limited Liability Corporation that, during the time alleged in the lawsuit, was owned by Lockheed Martin Integrated Technology LLC, Jacobs Engineering Group Inc., and Centerra Group (formerly G4S Government Solutions, and, prior to that, Wackenhut Services Inc.). Both Lockheed Martin Integrated Technology and LMSI were wholly-owned subsidiaries of LMC. Mr. Armijo is a Vice President of LMC and also served as a President of MSA during the time period in question. The allegations in the complaint relate to the management and technology solution services that MSA agreed to provide at Hanford. In January 2010, without competition, MSA awarded its affiliate, LMSI, a $232 million subcontract to perform that work from Jan. 1, 2010 through June 2016. The U.S.’s complaint alleges that the defendants knowingly made or caused false statements to the DOE regarding the amount of profit included in the billing rates for LMSI under the subcontract it was awarded by its affiliate, MSA. The complaint also alleges that the defendants’ claims for these inflated rates violated the False Claims Act. In addition, the complaint alleges that LMC made payments of more than $1 million to Armijo and other MSA executives in order to obtain improper favorable treatment from MSA with respect to the award of the LMSI subcontract at the inflated rates. The complaint further alleges that these payments violated the Anti-Kickback Act.

The Department of Justice reported that two owners and an employee of for-profit, non-accredited schools were sentenced for bribing a public official at the Department of Veterans Affairs (VA) in exchange for the public official’s facilitation of over $2 million in payments that were supposed to be dedicated to providing vocational training for military veterans with service-connected disabilities. Albert Poawui, of Laurel, Maryland, was the owner of Atius Technology Institute (“Atius”), a school purporting to specialize in information technology courses. Sombo Kanneh, of McLean, Virginia, was Mr. Poawui’s employee at Atius. Michelle Stevens, of Waldorf, Maryland, was the owner of Eelon Training Academy, a school purporting to specialize in digital media courses. James King, the VA official who all three defendants bribed, has pleaded guilty to bribery, wire fraud, and falsification of documents, and will be sentenced on February 15. According to admissions made in connection with Mr. Poawui and Mr. Kanneh’s pleas, in or about August 2015, Mr. Poawui and Mr. King agreed that Mr. Poawui would pay Mr. King a seven percent cash kickback of all payments made by the VA to Atius. In exchange, King steered VR&E program veterans to Atius regardless of the veterans’ educational needs or interests and notwithstanding their repeated complaints about the poor quality of education at Atius.

LABOR AND EMPLOYMENT

The Equal Employment Opportunity Commission (EEOC) issued a notice of proposed rulemaking proposing a revision to its federal sector complaint processing regulations in order to bring them into compliance with a federal circuit court decision concerning whether and when a complainant may file a civil action after having previously filed an administrative appeal or request for reconsideration with the EEOC. The proposed rule would clarify that an appeal to the EEOC is optional and that agency exhaustion can occur when an agency either takes final action on a complaint or fails to take final action on a complaint within 180 days of the complaint being filed. Since an EEOC appeal is options, complainants can file civil actions within 90 days of the receipt of an agency final action. Comments to the proposed rule are due April 15, 2019. 84 Fed. Reg. 31, 4015.

The Department of Labor announced the release of a new policy directive to establish a voluntary compliance program for high-performing federal contractors. The Voluntary Enterprise-wide Review Program (VERP) provides contractors with an alternative to the Office of Federal Contract Compliance Programs’ (OFCCP) establishment-based compliance evaluations with a focus on recognizing contractors that demonstrate comprehensive corporate-wide compliance and model diversity and inclusion programs. In November 2018, OFCCP issued a separate directive establishing early resolution procedures to allow OFCCP and contractors with multiple establishments to cooperatively resolve compliance reviews while achieving corporate-wide compliance with OFCCP's requirements. OFCCP expects to begin accepting VERP applications in the fall.

According to Law360, the Department of Justice (DOJ) endorsed a relatively long time limit for whistleblowers to launch False Claims Act (FCA) suits, telling the U.S. Supreme Court that FCA cases not joined by the government do not need to start sooner. In an amicus brief, the DOJ sided with a defense industry whistleblower in a dispute over the FCA’s statute of limitations. According to Law360, the DOJ’s amicus brief argues there is no clear sign that the statute of limitations is shorter for whistleblowers, unlike other FCA provisions that expressly treat whistleblowers differently. In the case, a whistleblower manager, Billy Joe Hunt, accused Parsons Corporation and Cochise Consultancy Inc. of defrauding the Department of Defense in connection with a munitions cleanup contract. Mr. Hunt filed suit in late 2013 but had alleged that the fraud ceased in early 2007, placing him outside the FCA’s usual six-year statute of limitations. However, the FCA contains an exception for when the government does not learn of the fraud until later, allowing suits to be filed as much as 10 years after wrongdoing occurred. The case presents the question of whether that exception applies to suits in which the DOJ declined to intervene, as happened in Mr. Hunt’s case. According to Law360, the DOJ argued there is no reason to think that the intent of the exception—to punish fraud that is hard to detect—should not apply to cases that whistleblowers handle without government help.

Investigations by the Department of Labor's Wage and Hour Division (WHD) have resulted in the recovery of $5,579,939 in back wages and benefits owed to 993 employees of nine subcontractors that provided power generator operation support for hurricane recovery efforts in Puerto Rico. WHD investigators found that the subcontractors violated requirements of the McNamara-O'Hara Service Contract Act (SCA), the Contract Work Hours and Safety Standards Act (CWHSSA), and the Fair Labor Standards Act (FLSA). Louis Berger U.S. Inc. and its parent entity Louis Berger Group Inc.—both based in Morristown, New Jersey—have paid $5,030,449 to resolve the SCA and CWHSSA violations while the subcontractors have paid $549,490 for the FLSA violations found by WHD. WHD investigators discovered violations that included failing to pay employees fringe benefits required by the SCA and failing to pay required wages to employees misclassified as independent contractors. Additionally, the practice of paying employees flat rates regardless of the number of hours that they worked resulted in overtime violations when those workers exceeded 40 hours in a week, without being paid overtime. WHD cited recordkeeping violations for employers' failure to maintain a record of the number of hours employees worked. Louis Berger US Inc. and Louis Berger Group Inc. have agreed to implement new procedures to ensure pay practices fully comply with applicable laws, and to ensure the compliance of subcontractors with the SCA, CWHSSA, and the FLSA on federal contracts.

CYBERSECURITY

The Government Accountability Office (GAO) released a report recommending that Congress consider developing comprehensive Internet privacy legislation to better protect consumers. The GAO decided to do the study after Facebook disclosed in April 2018 that a Cambridge University researcher may have improperly shared the data of up to 87 million of its users with a political consulting firm, which followed other incidents involving the misuse of consumers’ personal information from the Internet. The report noted that the U.S. does not have a comprehensive Internet privacy law governing the collection, use, and sale or other disclosure of consumers’ personal information. The report also examined how the Federal Trade Commission and Federal Communications Commission have overseen consumers’ Internet privacy and sought stakeholders’ views on the strengths and limitations of how Internet privacy currently is overseen and how, if at all, this approach could be enhanced.

PILIEROMAZZA BLOGS

TINA Traps: Defective Pricing in Competitively Awarded IDIQ Contracts

By Isaias Alba IV

While there has been extensive coverage of the fact that Truth in Negotiations Act ("TINA") thresholds for DoD were increased from $750,000 to $2M and certain civilian agencies have adopted the thresholds either via a FAR deviation or on an ad hoc basis, we have seen an increase in clients falling into insidious TINA traps—task orders on competitively awarded IDIQ contracts that require new labor categories or requirements not contemplated under the initial RFP.
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Not So Fast: Practical Considerations Before Novating Your GSA Schedule Contract

By Kathryn V. Flood

The acquisition market for federal contractors is booming. Acquisition can provide a buyer the opportunity to target its growth strategically by acquiring the seller's past performance and experience, in addition to gaining the seller's personnel and resources. Of course, part of what makes a seller attractive is the contracts found in its portfolio. While the government does not officially condone the "buying and selling" of federal contracts, a contract may be novated after an acquisition if the buyer has acquired all of the seller's assets or has acquired the entire portion of the seller's assets involved in performing the contract. Novations are necessary after acquisitions where the seller (or acquired assets or division of the seller) will be merged into the buyer and not be held as a separate subsidiary, so the seller's contracts implicated by the acquisition can continue to be performed and administered under the buyer's name.
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