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Hoping that contractors crying loudly attract attention

Barack Obama ready to issue executive order to enforce labor laws among contractors
Barack Obama ready to issue executive order to enforce labor laws among contractors
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There are many issues concerning government contractors and contracting management. Most citizens are unaware of the role of government contractors and how they are linked politically to the fabric of government and the economy. There are certain beliefs and attitudes about conducting business with the government that deserve a good airing with the public at large.

When politicians say that they want smaller government, are you aware that that battle cry is for smaller amounts of government contracting that results in fewer small, medium, and larger numbers of participating businesses? You see, most government contractors don’t have any other customers outside of government. They would be unviable businesses without government.

Some see that as a problem. How can a contractor provide best-in-class services when its only customer is the government? From where do government contractors gain best-in-class capabilities when their only customers are government? Do you see the paradox? You want smaller government, but you also want a thriving contracting community. However, you must establish a limit on that capacity because government operates as a function of the gross domestic economy.

You will often hear how government imposes too many requirements upon contractors, large, medium, and small. Reporting from first hand experience, there are many requirements in conducting business with the government that seem to be onerous and not worth the burden and added cost that they impose upon the process that is ultimately paid for by taxpayers.

77% of federal government prime contracting goes to medium and large enterprises. 23% of prime contracts goes to small business.

The news is that some contractors are complaining in advance about President Obama’s anticipated executive order that contractors inform their customers and prospects about labor law violations. Would you not want to know this if you were a government customer? Apparently, there are significant abuses among the contracting community, and the President want buyers to be aware of it and the role that they can play to stem the problem.

“Selling to the Government

As the world’s largest buyer of products and services, the Federal Government spends billions of dollars on purchases every single year. There have been several different goals set for the government to make sure that small businesses are allotted their fair share of business. These goals include:

  • 23% of prime contracts for small businesses
  • 5% of prime and subcontracts for women-owned small businesses
  • 3% of prime contracts for HUBZone small businesses
  • 3% of prime and subcontracts for service-disabled veteran-owned small businesses

Although these goals are not always achieved, it is a great point for the government to try to reach, and it ensures that small businesses are being considered for contracts.”

“Federal contractors vow to fight Obama executive order

By Benjamin Goad - 08/03/14 02:27 PM EDT

Business interests are vowing to fight President Obama’s executive order imposing new restrictions on companies who want to do business with the federal government.

Obama announced the action this week, ordering up new regulations that would require firms seeking federal contracts to disclose labor law violations and create new compliance advisors at agencies to oversee decisions about which firms get the work.

But contractors, already facing executive orders requiring them to pay a higher minimum wage and subjecting them to additional anti-discrimination rules, say the president went too far.

“We are concerned these sweeping changes threaten the due process rights of federal contractors and conflict with existing federal procurement and labor law,” said Geoff Burr, vice president of government for Associated Builders and Contractors. “ABC and the federal contracting community across all industries are prepared to fight this order in the courts and in Congress.”

John Meyers, a labor and employment lawyer at the firm Barnes & Thornburg, said federal funding cuts, including those linked to sequestration, have been particularly painful for contractors.

Part of the problem, and by no means the only problem topic is this one having to do with how contractors classify their independent contractors and part time workers. Forbes thought that this was a big deal over a year ago, and it still is.

“USDOL Enforcement Push, Worker Lawsuits

One of the highest priorities at the U.S. Labor Department is to identify situations in which workers are erroneously considered not to be employees or other covered individuals for purposes of complying with minimum-wage, overtime, and recordkeeping requirements and child-labor restrictions of the FLSA and similar federal wage laws it enforces. The agency calls this its Misclassification Initiative, and these efforts have resulted in significant liability, such as:

  • A consent judgment for $1.3 million against a nationwide provider of directory assistance and other information services that supplied its services through workers whom it considered to be independent contractors;
  • A $105,000 overtime assessment against a Texas employer that had considered workers to be independent contractors for their first 90 days with the company;
  • A $101,000 demand against a Virginia employer that had considered individuals performing work on a government-funded construction contract to be independent contractors or to be subcontractors.

Many other USDOL misclassification investigations are underway across the country. Moreover, USDOL has entered into alliances to promote enforcement and information-sharing with the U.S. Internal Revenue Service and with officials in 14 states (so far). U.S. Labor Secretary nominee Thomas Perez highlighted worker-misclassification issues at Maryland’s Labor Department and can be expected to pursue the matter at least as aggressively at the federal level.

Nor is USDOL the only potential adversary. FLSA misclassification lawsuits too numerous to list are making their way through the nation’s courts. Some involve a challenge to non-employee status brought by just one claimant. But others are being pressed by many individuals who have joined their allegations together in a complaint brought as an FLSA “collective action”, as a class action under another jurisdiction’s law, or as both. Some of these claims will be successful, while some will not be, but most will necessitate the defendant’s diverting considerable time and already-scarce resources to the battle.

The Time For Reflection Is Now

In the current legal climate, the best move is to evaluate without delay what the prospects are that management can defend treating “contract” workers as being non-employees for wage-hour purposes. The relevant legal test(s) can depend upon which law is being applied.
Where the FLSA is concerned, USDOL and the courts tend to ask what the “economic realities” of the situation are, taking into account considerations such as:

  • The extent to which the person’s work is controlled by the alleged employer;
  • Whether and to what extent the individual has any investment in the necessary facilities, equipment, supplies, etc.;
  • Whether and to what extent the individual has opportunities for profit or loss in a business sense;
  • The extent to which the person uses any initiative, judgment, or foresight from an entrepreneurial standpoint;
  • Whether the relationship is permanent or indefinite, as opposed to being temporary or for a definite duration;
  • Whether and to what extent the individual’s work is an integral part of alleged employer’s business.

In sizing-up a particular arrangement, decision makers sometimes look in part at whether a contractor’s work is the same as, or similar to, that done by acknowledged employees, and whether the training, supervision, and other oversight exercised over the contractor are the same as, or similar to, those for acknowledged employees. Other pertinent questions might involve, for instance, whether the alleged employer finances or underwrites the contractor’s purchases of tools, supplies, and equipment, either literally or as a practical matter."

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