Services
United States of America, et. al. v. The Kane Company, 05-317 (D.D.C. Cir. 2011) *NEW*
Lesson Learned - SCA violations may now risk False Claims Act liability.
Facts. In a qui tam action in which the Government intervened, the Defendant-contractor’s former employee alleged that the Defendant violated the SCA since 1998 by knowingly and consistently avoiding payment of SCA-required wages to employees working on the Defendant's government contracts. Further, the Defendant continued to pursue federal service contracts with no intention of bringing its practices into compliance with the SCA. After the employee was fired for poor performance in January of 2005, in February of 2005 he filed a Complaint alleging, among other claims, False Claims Act (FCA) liability.
Issue(s). Can SCA violations amount to: 1) knowingly presenting a false claim for payment; 2) knowingly using a false record or statement material to getting a false or fraudulent claim paid; or 3) conspiring to defraud the U.S. by getting a false or fraudulent claim allowed or paid? These are the standards of liability under the FCA.
Answer. Maybe – the U.S. District Court for the District of Columbia allowed such allegations to survive a motion to dismiss. In a decision that acknowledged that the FCA should be broadly interpreted "to reach all types of fraud," the court held that the allegations in the Complaint sufficiently established "false claims." Claims the former employee brought under the FCA including false presentment, fraudulent inducement, and false certification will move forward. Even if the Defendant ultimately prevails in these claims against it, this promises to be a very costly victory.
United Government Security Officers of America Local 80, 2000 WL 1273986 (DOL Adm.Rev.Bd)
Lesson Learned – As a union employee, know that you get only what your bargain for – even if it is lower that a DOL issued wage determination.
Facts. In this case, a union had bargained for a wage rate of $16.65/hour for its security officers, and was upset to realize that the prevailing wage rate for security officers in that locality was $17.57. The DOL had issued this wage determination in error because it mistakenly believed no CBA was in place.
In arguing that the wages of its workers should be increased to the $17.57 rate, the union cited 29 CFR §4.165, which states: “if an applicable wage determination contains a wage or fringe benefit provision for a class of service employees which is higher than that specified in an existing union agreement, the determination’s provision must be observed for any work performed on a contract subject to that determination.” Basically, the union argued that its employees were entitled to whichever rate was higher.
Issue. If employees under a service contract are union employees, are they automatically entitled to a wage increase if the wage determination rate is greater than that contained within their CBA?
Answer. No. The administrative review board held that the language of 29 CFR §4.165 reinforces the idea that: (1) a CBA can have higher wage rates than the applicable SCA wage determination; and (2) a collective bargaining agreement containing lower rates does not trump the minimum wage and fringe benefit requirements of a duly-issued SCA wage determination. Here, the DOL wage determination was issued in error, and did not properly apply to the contract. The only wage determination applicable was the one covered by the CBA.
HOWEVER, note that if the wage determination had been properly issued (issued when a CBA was not already in place), the union would have been entitled to the higher wages.
Charles Igwe and KSC-Tri-Systems, USA, 2009 WL 4324725 (DOL Adm.Rev.Bd).
Lesson Learned – Proving “unusual circumstances” to avoid debarment is not only very fact-sensitive, but can be difficult to do.
Facts. In this case, a contractor was found to have failed to pay its employees the prevailing wage rates and holiday and overtime compensation, as well as comply with the SCA’s recordkeeping requirements. The DOL Administrative Law Judge determined that the contractor should be debarred.
In appealing this decision, the contractor advanced the defense of “unusual circumstances,” which is a three-pronged test that a contractor must meet in order to avoid debarment (see 29 CFR §4.188). The DOL looks at three factors in deciding whether to debar:
Issue. Did the contractor show “unusual circumstances” in order to avoid debarment?
Answer. In this instance, no. In deciding to debar, DOL noted that the contractor’s conduct spanned across four different contracts, which included options, and yet still failed to read or inquire as to the requirements of the SCA and the wage determinations. This was “willful and deliberate” disregard. Because the contractor failed to show the first factor, DOL did not examine the others.
Joy R. Manning D/B/A Manning Mail Service, 1990 WL 656147 (BSCA No. 82-SCA -136).
Lesson Learned - Whether an employee should be compensated for “layover time” depends on what that employee may do with his time, the length of time and where the “layover time” occurs.
Facts. In this case, a contractor that provided mail hauling was charged with violating the SCA for failure to compensate its employees during a “layover” period. During this time, the drivers on certain inter-city hauls spent time waiting between trips in Kingsburg, Texas, on the Austin-Kingsbury mail run.
This case examined what kind of time where an employee is not technically “working” is compensable. It distinguished between those situations where an employee is “waiting to be engaged” (not working time) or “engaged to wait” (working time). Here, the Board of Service Contract Appeals noted that what constitutes compensable time may depend on the number of hours, but also on where the layover occurs.
Issue. Under the circumstances of this case, are drivers’ layover hours compensable?
Answer. Although this was a “somewhat close case,” the Board concluded that the layover hours were compensable under 29 CFR 4.178, 785.18 and 785.19. Here, the location of the layover was remote and the employees had little choice relating to what to do with their time.
Midwest Transit, Inc., 1987 WL 41216 (P.S.B.C.A.), 87-3 BCA P 20079
Lesson Learned – Include all costs incurred under your SCA obligations in your proposal.
Facts. In this mistake-in-bid case, a contractor had been asked to submit a cost sheet that captured a listing of cost elements and costs making up its bid amount. In submitting this, the contractor specifically stated that it did not anticipate cost for vacation in the first year of the contract and that after the first year when vacation costs were incurred, it would submit a price adjustment to the contracting agency.
As it stated it would, the contractor later asked for a price adjustment for its incurred vacation costs. The government refused to grant the price adjustment on the grounds that the contractor should have included these expenses in its cost sheet.
Issue. Was the contractor right to not include vacation pay in its cost sheet?
Answer. The Board held that the contractor was right only to the extent that it hired new employees to perform the work. 29 CFR §4.173 contains the “vesting” provisions for vacation pay, which provide that vacation pay does not vest for one year. Thus, the contractor was entitled to a price adjustment for new employees, because their vacation pay would not “vest” during that first year, but the contractor could not get a price adjustment for any other employees because their vacation pay vested during the first year.
Dantran, Inc. & Robert Holmes, 1997 WL 321049 (L.B.S.C.A.), BSCA No. 93-SCA-26
Lesson Learned – If your procuring agency gives you bad advice about SCA compliance, you can still be debarred. As such, it is important to seek out advice from private contracting professionals.
Facts. In this case, the DOL Administrative Law Judge had found that contractors violated the SCA by “cross-crediting” fringe benefits on their multiple contracts with the U.S. Postal Service and/or their payment to the affected service employees on a monthly basis. The contractors contended that they believed they were in compliance because they relied on the advice of Postal Service officials. The contractors raised an estoppel/detrimental reliance defense, which basically means that they argued that they should not be held at fault because they relied on the word of the procuring agency in continuing their pay practices.
Issue. Is it a defense for a contractor that a contracting agency gave it incorrect advice as it relates to SCA-adherence?
Answer. No. In this case, the contractors were debarred. The Administrative Review Board noted that the law says that the obligation to comply with the SCA, and the burden of obtaining the knowledge to comply, rests at all time with the government contractor.
Lear Siegler Services, Inc. v. Rumsfield, 457 F.3d 1262 (2006)
Lesson Learned – You may seek a price adjustment if your costs for compliance with SCA fringe benefit requirements increase without also increasing the benefits to your employees.
Facts. In this case, an aircraft maintenance service contractor submitted a request for a price adjustment under the SCA price adjustment clause to account for increased costs of providing its employees with a defined-benefit health plan. This kind of plan obligates an employer to spend whatever is necessary to continue to provide its employees with an agreed-upon level of benefit. On appeal, the Administrative Review Board affirmed the denial on the rationale that an increase in an employer’s costs of providing benefits was not sufficient to trigger the Price Adjustment Clause – there had to be an increase in the benefits themselves. [See 48 CFR §52.222-43]. The contractor then appealed to the district court.
Issue. Is the price adjustment clause only triggered by an increase in the amount of benefits provided to employees?
Answer. No. The language of the price adjustment clause clearly provides that an increase is warranted when the contractor’s cost of compliance increases. The fact that there has been no nominal change in the mandated benefit (i.e., that the employees’ benefits don’t increase), is irrelevant.
