As the summer and FY16 wind down, several changes and proposed changes have been issued, some of which may be of interest to nonprofits. Most notably, the U.S. Department of Labor (DOL) issued a final rule on fair pay and safe workplaces that could have significant ramifications for those organizations found not to be in compliance with various labor laws. The U.S. Agency for International Development (USAID) and the U.S. Office of Management and Budget (OMB) also issued a proposed rule and request for comments. As always, we will continue to monitor developments of particular import to nonprofits.
Final Fair Pay and Safe Workplaces Federal Regulations Are Published
On August 25, 2016, the DOL and the Federal Acquisition Regulatory (FAR) Council published the final regulations and guidance implementing President Obama's "Fair Pay and Safe Workplaces" Executive Order (E.O. 13673) (the Executive Order). The Executive Order, often referred to as the "blacklisting" executive order, and the applicable regulations, require current and prospective federal contractors, including nonprofits, with covered contracts to disclose labor law decisions (i.e., administrative determinations, arbitral awards, and civil judgments) as well as violations of 14 federal workplace laws, including the Fair Labor Standards Act, the Family Medical Leave Act and the National Labor Relations Act, along with state law equivalents (to be determined at a later date by the DOL). Federal agencies must then consider and assess these workplace compliance histories in determining whether to award contracts or subcontracts valued at $500,000 or more. In addition, the Executive Order and final rules impose pay transparency obligations on covered contractors and subcontractors, which require the provision of information regarding hours worked, overtime hours, pay, deductions, exempt/nonexempt status and, if applicable, status as an independent contractor, to covered workers. Finally, the regulations prohibit contractors with contracts valued at $1,000,000 or more from entering into, prior to disputes, agreements with employees under which Title VII or any tort-related claims would be subject to mandatory arbitration.
Of primary importance, the final regulations clarify issues left open by the proposed regulations, by setting forth a phased-in implementation schedule for reporting and compliance requirements. Specifically:
- Voluntary Pre-Assessments: Beginning September 12, 2016, for purposes of future bids, contractors may request from the DOL pre-assessments of their workplace compliance history.
- Effective Date and Applicability to Certain Prime Contractors: On October 25, 2016, the final regulations become effective. Disclosures and workplace compliance assessments begin for all prime contractors under consideration for contracts valued at or greater than $50 million. The initial reporting disclosure period is one year, but gradually increases to three years by October 25, 2018.
- Paycheck Transparency Obligations: On January 1, 2017, the paycheck transparency obligations become effective.
- Decrease in Prime Contract Value Threshold: On April 25, 2017, disclosures and workplace compliance assessments begin for all prime contractors under consideration for contracts valued at or greater than $500,000.
- Applicability to Subcontractors: On October 25, 2017, disclosures and assessments begin for all subcontractors under consideration for subcontracts valued at or greater than $500,000. Subcontractors must make the requisite disclosure to the DOL and report the DOL assessment to the prime contractor.
While neither the Executive Order nor the final rule impacts grant recipients and will most certainly will face legal challenges, the Fair Pay and Safe Workplaces Executive Order and its implementing regulations place additional burdens on entities, including nonprofits, engaged in contracting directly or indirectly, through subcontracts, with the federal government.
NOTICE: PROPOSED RULE CHANGE—USAID Rule Would Allow Use of Foreign Contracting Officers
On August 19, 2016, the USAID issued a proposed rule that would allow the agency to expand a pilot program that has been in place since 2011 to use certain foreign nationals as contracting officers. According to the agency, it currently possesses a warranted contracting staff of just 150 personnel located overseas. This rule is intended, at least in part, to help the agency address a shortage of U.S. contracting officers while also helping to bolster host country technical capacity.
While the rule seeks to lift previous restrictions on citizenship for contracting officers, it is unclear what parameters will be imposed, as the rule fails to set out hiring criteria or minimum requirements. Thus, while certain aspects of this effort appear appealing, it is unclear whether this will be an ultimate improvement over the thinly spread staff of today. In addition, the new rule seeks to make clear that USAID's rule that certain employment restrictions related to third-country nationals and cooperating country nationals employed by a USAID contractor do not apply to consultants.
Nonprofits should consider carefully whether these changes could impose additional contracting hurdles or hardships, or conversely should be supported, and submit comments accordingly. Comments are due no later than October 18, 2016.
NOTICE: COMMENTS SOLICITED—OMB Seeks Comments for a Second Time on Anti-Kickback Procedures
On August 26, 2016, the OMB issued a notice of request for public comments of a previously approved information collection requirement concerning anti-kickback procedures. This is OMB's second attempt at soliciting input (no comments were received after its first public notice dated May 18, 2016).
The FAR 52.203–7, Anti-Kickback Procedures, requires that all contractors have in place and follow reasonable procedures designed to prevent and detect, in their own operations and direct business relationships, violations of 41 U.S.C. Chapter 87, Kickbacks. Whenever prime contractors or subcontractors have reasonable grounds to believe that a violation of the statute may have occurred, they are required to report the possible violation in writing to the contracting agency's inspector general, the head of the contracting agency if an agency does not have an inspector general, or the U.S. Department of Justice. The federal government uses the information to determine if any violations of the statute have occurred. There is no federal government-wide data collection process or system that identifies the number of alleged violations of 41 U.S.C. Chapter 87 that are reported annually.
Public comments are particularly invited on: whether the collection of information is necessary for the proper performance of functions of the FAR, and whether it will have practical utility; whether the federal government's estimate of the public burden of this collection of information is accurate, and based on valid assumptions and methodology; ways to enhance the quality, utility and clarity of the information to be collected; and ways in which the government can minimize the burden of the collection of information on those who are to respond, through the use of appropriate technological collection techniques or other forms of information technology.
This notice is important for at least two reasons. First, nonprofits should consider whether they wish to provide input on a process that they may ultimately find themselves subjected to, if for no other reason than how such information should be handled or how the data submitted is to be utilized. Second, nonprofits should heed the federal government's interest in this area as a warning that increased scrutiny and enforcement activity in the anti-kickback arena may be on the horizon and, thus, review their code of conduct and related policies to ensure they meet the FAR's requirements and embody best practices in this area.
Upcoming Nonprofit Luncheon/Program and Webinar
How to Protect Nonprofits' Federally Funded Programs with Global Anti-Corruption Controls, co-sponsored by Venable LLP and InsideNGO
Tuesday, September 20, 2016 | 12:00 - 2:00 p.m. ET
In the wake of recent headlines concerning corrupt use and handling of U.S. funds, nonprofits relying on federal grants, cooperative agreements, and contracts must take away key lessons to protect their program funds and revenue. It's more than bribery. During this program, our panelists—including a key representative from USAID’s Inspector General's Office—will examine the characteristics of several recent events as well as findings regarding fraudulent payments to vendors and corrupt employment practices in the Middle East impacting the work of U.S. nongovernmental organizations (international NGOs). This program will take you beyond the four corners of the federal False Claims Act and Foreign Corrupt Practices Act to provide participants with legal and practical solutions to protect your nonprofit's program integrity and revenue.
To view our prior publications on nonprofit government grant and contract issues, please click here.