DOL’s Proposed Rule on Paid Sick Leave for Federal Contractors Will Significantly Increase Costs and Contract Administration Requirements for Contractors

Christian N. Curran

Curran

In February the Department of Labor (“DOL”) published a proposed rule implementing the mandate of Executive Order 13706 to require that all federal contractors provide paid sick leave to their employees.  The rule will significantly impact government contractors.  DOL estimates that the rule will require the provision of paid sick leave to over 800,000 contractor employees, over half of which currently have no such benefits at all.  The rule will also require extensive recordkeeping and related tracking efforts for compliance and reporting purposes which will significantly increase administrative burdens for contractors at substantial cost.  The proposed rule will apply to all contracts solicited or awarded after January 1, 2017.  The key provisions of the proposed rule are as follows.

  • Amount of Sick Leave: The rule requires that one hour of sick leave be provided for every thirty hours of work on covered contracts, for a minimum total of 56 hours per year.
  • Covered Contracts: The proposed rule would apply to several categories of contracts, including construction contracts covered by the Davis-Bacon Act, service contracts covered by the Service Contract Act, concessions contracts, and contracts regarding federal property or lands and relating to services for federal employees, dependents, or the public.

Continue reading “DOL’s Proposed Rule on Paid Sick Leave for Federal Contractors Will Significantly Increase Costs and Contract Administration Requirements for Contractors”

Kingdomware Technologies, Inc. v. United States May Have Profound Impacts on Veterans Affairs Procurements

Lyndsay A. Gorton 

Lyndsay A. GortonLate last month, the Supreme Court heard oral arguments in Kingdomware Technologies, Inc. v. United States, which concerns the extent to which the Veterans Benefits, Health Care, and Information Technology Act of 2006 (“Veterans Act of 2006”) limits the ability of the Department of Veterans Affairs (“VA”) to use contracting vehicles like the Federal Supply Schedule (“FSS”).  The ruling may have a major impact on VA procurements and warrants close attention from contractors serving the VA.

The Veterans Act of 2006 requires the VA to award contracts to Veteran-Owned Small Businesses (“VOSB”) and Service-Disabled Veteran-Owned Small Businesses (“SDVOSB”) where a contracting officer “has a reasonable expectation that two or more small business concerns owned and controlled by veterans will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States.” (This is often referred to as the “Rule of Two.”) In 2012, Kingdomware Technologies, Inc. (“Kingdomware”) successfully protested to GAO that the Rule of Two prevented the VA from making an FSS award to a non-VOSB.  The VA declined to follow GAO’s recommendation.  Kingdomware continued to press its case at the Court of Federal Claims, but both the court and Federal Circuit sided with the VA. Continue reading “Kingdomware Technologies, Inc. v. United States May Have Profound Impacts on Veterans Affairs Procurements”

Supreme Court to Resolve Circuit Split, Decide Viability of Plaintiff-Friendly Implied Certification Theory for FCA Liability

Daniel Broderick

BroderickDWith the filing of relators’ brief in United Health Services, the Supreme Court is one step closer to resolving one of the most controversial issues in False Claims Act (“FCA”) jurisprudence:  whether “implied certification” is a valid liability theory under the FCA.

Under the implied certification theory, the plaintiff may allege that, by submitting any claim for payment to the government, a contractor impliedly certifies compliance with all applicable statutory, regulatory, and contractual requirements.  Thus, under this theory, even where the contractor provided all of the goods and services for which it seeks payment, the government is allegedly wronged because it would not have paid for the items or service if it was aware of the contractor’s noncompliance with these other requirements.

Because the FCA makes it unlawful to knowingly submit a false or fraudulent claim for payment to the government—and imposes treble damages plus civil penalties ranging from $5,500 to $11,000 per claim—plaintiffs  are strongly incentivized to assert the “implied certification” theory, which does not require the more difficult showing of an express false statement.  Not surprisingly, the aggressive use of the implied certification theory has contributed to much of the recent increase in government enforcement actions and billions of dollars in recovery, including by settlements designed to avoid the legal uncertainty and the potentially significant damages and penalties under the FCA.  The Supreme Court agreed in December to hear the case to resolve a circuit split as to whether implied certification is viable. Continue reading “Supreme Court to Resolve Circuit Split, Decide Viability of Plaintiff-Friendly Implied Certification Theory for FCA Liability”

Sixth Circuit Brings False Claims Act Damages Back Down to Earth

Heather L. Petrovich

In a welcomed decision, the Sixth Circuit placed sensible parameters on damages in False Claims Act (“FCA”) cases, which will significantly reduce exposure for contractors.  In United States ex rel. Wall v. Circle C Construction, LLC No. 14-6150, 2016 WL 423750 (6th Cir. Feb. 4, 2016), the Sixth Circuit rejected the government’s argument that where the contractor’s alleged fraud or false certification induced the government to enter into the contract or was a condition for participation or eligibility, damages should be treble the full contract value, even if the work has been performed to the government’s satisfaction.

Under the FCA, while the government may recover “3 times the amount of damages which the Government sustains because of the act,” 31 U.S.C. § 3729(a), damages are not defined and have thus led to varying formulations among the circuits.  Wall involved a construction contract for Army warehouses and required the contractor to certify compliance with certain minimum wage requirements, but a subcontractor paid its employees less than the required minimum. Even though there were no performance issues with the work itself, and instead of seeking damages based on the subcontractor’s compensatory shortfall, the government argued, and the district court agreed, that damages should be treble the full contract value.  This resulted in assessed damages that were approximately 76 times more than the subcontractor’s wage deficit, which was the actual harm to the government. Continue reading “Sixth Circuit Brings False Claims Act Damages Back Down to Earth”

The Justice Department’s Yates Memorandum and Three Tips for Government Contractors to Manage the Risks

Justin A. Chiarodo and Christian N. Curran

Justin A. Chiarodo Christian N. CurranThe Department of Justice (DOJ) is setting its sights on individual accountability for corporate wrongdoing. That is the message that DOJ has been promoting following the recent internal memorandum issued by Deputy Attorney General Sally Quillian Yates titled “Individual Accountability for Corporate Wrongdoing” (the Yates Memo), which relates to DOJ’s practices in conducting corporate investigations. Although the idea of holding individuals accountable for corporate wrongdoing is not new, the Yates Memo’s relative focus on individuals as part of corporate investigations suggests more scrutiny of individuals in civil and criminal investigations. This focus complements a well-documented increase in the suspension and debarment of individuals in recent years, and reinforces the heightened risks that business owners, executives, managers, and employees face throughout the government contracting community.

The Yates Memo presents a good opportunity for government contractors to review their compliance programs in the new year—and in particular their practices for conducting internal investigations—to ensure that they are actively managing the risks presented by this professed focus on individuals. This alert summarizes the Yates Memo and offers three tips to government contractors to consider in response. Continue reading “The Justice Department’s Yates Memorandum and Three Tips for Government Contractors to Manage the Risks”

What DoD Contractors Need to Know: New Changes to Cybersecurity and Cloud Computing Regulations

Justin A. Chiarodo and Philip E. Beshara

Justin A. Chiarodo Philip E. BesharaAs the federal government and contracting community near the end of a year filled with headline-grabbing cyber incidents, the Department of Defense (DoD) has recently issued interim cybersecurity and cloud computing regulations that amend the DFARS and impose important new information safeguarding, reporting, and cloud computing requirements. These are major changes that impact all DoD contractors, and if your company holds DoD contracts you should carefully review these new requirements and assess them as part of your broader corporate cybersecurity strategy.

This alert highlights the key requirements in the Interim Rule (available here).

Information Safeguarding and Cybersecurity Reporting

The Interim Rule expands DoD’s cybersecurity safeguarding and reporting requirements, including the types of information covered by the requirements, governing standards, and triggering events. Up until now, many of DoD’s cybersecurity requirements applied to select groups of defense contractors—those deemed “operationally critical” under the 2015 NDAA or “cleared defense contractors” under the 2013 NDAA, and contractors handling “unclassified controlled technical information,” or “UCTI,” under the DFARS. Continue reading “What DoD Contractors Need to Know: New Changes to Cybersecurity and Cloud Computing Regulations”

Déjà Vu All Over Again: Six Tips to Prepare for a Government Shutdown

Justin A. Chiarodo and Heather L. Petrovich

With Congress quickly approaching a September 30 funding deadline with no adequate spending measures in place, and the Office of Management and Budget now directing agencies to prepare contingency plans, the possibility of a government shutdown is becoming increasingly likely. Unfortunately, government contractors faced these challenges just two short years ago during a 16-day shutdown. Among other challenges, contractors may face a lack of incremental funding; the inability to enter into new contracts or contract modifications; closed government facilities; furloughed government employees; delayed payments; increased indirect costs; and unexercised and deferred contract options. This alert highlights steps government contractors can take to protect their business interests in the event of a shutdown.

Review Your Contracts 

Reviewing your contracts is good advice in all times, but particularly so when facing a shutdown. Several key areas are worth reviewing before a shutdown. First, contractors should consider the amount and type of contract funding for each contract. A shutdown will affect incrementally funded contracts more than fully funded contracts. Though exceptions may apply, the funding for incrementally funded contracts may lapse in the event of a shutdown, which could cause the contract work to come to a halt. Fully funded contracts may be impacted by furloughed employees, facility closures, or other unexpected costs. Second, the place of contract performance may affect the ongoing work on a contract if the contractor is performing at a government facility. Many government facilities will close during a shutdown and furloughed employees or limited hours may affect those government facilities that do remain open. Third, the period of contract performance may affect a contract in that the government cannot exercise options and contract extensions during a shutdown. Fourth, the statement of work could also affect how the shutdown applies to a contract. For instance, national security and emergency preparedness contracts are much more likely to be funded during a shutdown than facility maintenance work. Nonetheless, even those exempt contracts may still be affected if the statement of work requires contractors or projects to interact with furloughed employees. Continue reading “Déjà Vu All Over Again: Six Tips to Prepare for a Government Shutdown”

New Legal Landmines for Government Contractors

Deborah P. Kelly

Deborah P. KellyBuckle up: In his last term, President Obama has unleashed a flurry of Executive Orders and Presidential Memoranda that promise sweeping changes for government contractors and their employees. Below, we outline some of the major recent workplace initiatives that create new restrictions and requirements for government contractors, describe their effects, and suggest what to do about them.

  1. The “Blacklisting” Order

What’s New?

On July 31, 2014, President Obama signed Executive Order (E.O. 13673) “Fair Pay and Safe Workplaces,” known as the “Blacklisting” Order, which instructs contracting officers to make responsibility determinations for procurements over $500,000 based on a subjective review of federal contractors’ compliance with 14 federal and equivalent state labor, employment, and safety laws. The Department of Labor’s proposed guidance and the FAR Council’s proposed regulations would create an online database for agencies to track contractors’ violations, which could provide a basis for suspension and debarment procedures. Continue reading “New Legal Landmines for Government Contractors”

We Just Received a Government Subpoena. Now What?

Merle M. DeLancey Jr., Steven J. Roman, James R. Murray, and Christian N. Curran

Merle Delancey Justin A. ChiarodoJames Murray Christian N. Curran

If you are a multi-million dollar company and receive a subpoena for your documents and records, you simply send it to the legal department. But what if you are a smaller healthcare provider? Responding to a government subpoena can be daunting, especially if it is your first one, and you may not have the personnel or resources to respond without a significant disruption to your business. Does the subpoena mean you or your company is about to be charged with a crime? Do you have to submit original records? Will the government insist on the production of all documents within the often broadly worded scope of a subpoena? How do you deal with electronic information on your computer system? How do you protect patient confidentiality? Will your insurance help with the costs of complying with the subpoena? What can you do to ensure the company is prepared ahead of time?

Step One: Issue a Document Hold Notice and Consult Counsel

The first thing you should do when you receive a government subpoena is issue a written notice to your employees to protect and maintain any documents and records that may be encompassed by the subpoena. As part of that process, you will also need to suspend any records destruction practices that you currently have in place. The failure to produce or preserve potentially relevant documents and information can result in significant exposure. Courts have regularly penalized companies and individuals who fail to produce or preserve potentially relevant materials. It is important to send the notice out as soon as possible and to thoroughly document its distribution. You should also simultaneously consult with counsel to review the subpoena and ensure that you are taking all necessary steps to preserve information. Continue reading “We Just Received a Government Subpoena. Now What?”

Medicare Advantage Program Enforcement: Increased Publicity May Lead to Increased Scrutiny

Merle M. DeLancey Jr. and Lyndsay A. Gorton

Merle DelanceyLyndsay A. GortonOn May 19, 2015, the chairman of the Senate Judiciary Committee, Senator Charles E. Grassley (R-IA), requested information from United States Attorney General Loretta Lynch and Andrew M. Slavitt, Acting Administrator for Centers for Medicare and Medicaid Services (CMS) regarding how the agencies are working together and separately to prevent Medicare Advantage fraud. Senator Grassley’s letters rely on April 2015 investigative findings issued by the Center for Public Integrity for his assertion that there is “an increasing number of lawsuits against insurance companies” for Medicare Advantage fraud, and the Government Accountability Office’s (GAO) 2015 Annual Report, which suggests that CMS “could save billions of dollars by improving the accuracy of its payments to Medicare Advantage programs. . . .” To ensure that CMS has the appropriate “safeguards” in place to prevent fraud, Senator Grassley requested answers to the following questions by June 3, 2015:

  1. What steps has the Department of Justice (DOJ) taken, and is currently taking, to ensure that insurance companies are not fraudulently altering risk scores?
  2. Is DOJ working in conjunction with CMS to investigate risk score fraud? If not, why not?
  3. In the past five years, how many Medicare Advantage risk score fraud investigations has DOJ conducted? Of the investigations, how many have resulted in criminal and/or civil sanction?

Senator Grassley’s letters were sent only weeks after CMS issued its 2016 Rate Announcement and Call Letter on April 6, 2015. After accepting and reviewing comments on its Advance Notice and Draft Call Letter, which estimated a 0.95 percent decrease in revenue for plan providers, the April 6 announcement estimated a 3.25 percent increase in revenue based on finalized 2016 rates. Neither the Attorney General nor CMS has responded to Senator Grassley’s requests. Continue reading “Medicare Advantage Program Enforcement: Increased Publicity May Lead to Increased Scrutiny”