Labor Talk

Newsletter September 2018

Volume 1 Issue 1

THOM AS D . O’CONNOR Contr act Indus tr ia l R e la t ions/Labor Adv isor Of f i ce o f the Ass is tan t Secretary o f the Navy (R es earch , Dev elop men t & A cquis i t ion ) , DA SN (A cquis i t ion & Procur emen t) thomas.d .oconnor@navy. mi l , ( 703) 693 -2939

“Topics you’d like to see

covered in a future

newsletter? Just let me

know.”

I N S I D E T H I S I S S U E

1. Introductions

2. Reinstituting the Labor Talk Newsletter

3. Hot Topics!

4. Subject of the Day

5. Q&A Corner

Introductions: Pleased to Meet You! My name is Thomas O’Connor, and last year I joined the Department of the Navy as Contract Industrial Relations Advisor/Labor Advisor. I came to the Navy with 16 years of government service, practicing labor law in the Offices of General Counsel at the National Labor Relations Board (2000-2007) and the U.S. Department of Energy (2007-2017), where I also served as a labor advisor. In these positions, I worked on labor relations and labor standards issues affecting private employers, including government service and construction contractors.

I look forward to assisting you as you work through contract labor issues, which are largely set forth in FAR Part 22, and include matters such as strikes and picketing by contractor employees at Department of Navy installations, Service Contract Labor Standards (SCLS) wage determinations (WDs) and price adjustments, and any other issues that you face.

You may also know NAVFAC’s Labor Advisor, Lynn Forbes. She has extensive experience on labor issues affecting government contracts, leads a team of labor coordinators, and teaches an excellent course, NAVFAC CTC 422, Application of Labor Laws to Federal Contracts. Lynn can be reached at lynn.forbes@navy.mil and (360) 396-0272.

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You may be asking: Why am I receiving this newsletter and how does it

benefit me? Well, several years ago a former Navy Labor Advisor issued

periodic newsletters that informed the Navy acquisition community about

labor law developments and provided general guidance on various labor

subjects. We are reinstituting the newsletter for these same reasons, and to

foster consistency in application of contract labor requirements. The

newsletter is also a vehicle to let you know that we are here as a resource to

answer your questions, provide in-person training, assist navigating

Department of Labor (DOL) investigations, and to provide any other

assistance with your contract labor matters. Training can be as broad or

targeted as desired. Past versions of the newsletter, including an index

organized by topic, are available on the ASN (RD&A) One Source Contract

Labor Standards and Relations website (access through hyperlink). Topics

you’d like to see covered in a future newsletter? Just let me know.

REINSTITUTING THE LABOR TALK NEWSLETTER

HOT TOPIC: TRANSITION OF WDOL.GOV to SAM.GOV

Official WDs for the Service Contract Labor Standards statute (or SCLS, formerly known as the Service Contract

Act) and the Construction Wage Rate Requirements statute (formerly known as the Davis-Bacon Act) are

available at www.wdol.gov. This website is part of the Integrated Acquisition Environment consisting of nine

government-wide integrated systems, which resulted from an E-Government initiative under President George W.

Bush, and was designed to streamline the acquisition process. The WDOL website includes a library of labor

standards research materials, and a link to the DoN Price Adjustment Calculation Tool (PACT), which streamlines

the SCLS price adjustment process for contractors and government officials.

The new information we are providing here is that the WDOL website will soon be retired and WDs will then be

available through a module contained in SAM.gov. We are told these changes will occur in FY19 Q1, and we do

not know if there will be a period during which WDOL and the SAM WD module will co-exist. In the meantime,

the new module is available in testing mode at https://beta.sam.gov/.

As we approach the end of the fiscal year, it is vital that Federal contracting personnel continue to use the

WDOL website to obtain WDs for incorporation into new solicitations and awards, option year

modifications, extensions, and any contract action requiring a new or updated WD under FAR 22.1007.

The WD module at beta.SAM.gov should not be used for any contract actions. We will further update you

when the SAM WD module is available for official use. We also note the WD module is unlikely to house the

PACT Tool, but it will remain available on ASN (RD&A)’s website.

Please also note that the first time you log into SAM.gov after June 29, 2018, the system will ask you to create a

login.gov user account if you don’t already have one. Your previous SAM.gov username and password will no

longer work. For more information on the new log-in process, see GSA’s website.

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“We are here as a

resource, to answer your

questions, provide in-

person training, assist

navigating Department of

Labor (DOL)

investigations, and to

provide any other

assistance with your

contract labor matters.”

Page 3

Labor Talk Newsletter

On July 11, 2018, DOL issued All-Agency Memorandum (AAM) No. 227,

which published DOL’s most recent annual updates to the SCLS prevailing

health & welfare (H&W) rate. The new H&W rates apply to new

solicitations issued and contracts awarded on or after July 11, 2018 and

periods of contract performance commencing on or after that date. As in

2017, DOL established two basic H&W rates: $4.18/hour for contracts

subject to Executive Order 13706, Establishing Paid Sick Leave for Federal

Contractors (EO), and $4.48/hour for contracts not subject to the EO (EO

13706 applies to solicitations issued on or after January 1, 2017).

DOL notes that contracting agencies may make pen-and-ink changes to a

WD in a covered solicitation or contract that does not contain the new

H&W rates. This will apply to WDs predating July 11, and some post-July

11 WDs if DOL hasn’t issued a new revision to that WD.

Please note two things in particular. First, these increases do not affect

most contracts that are on a fiscal year cycle until the start of the new period

of performance, when a new or revised WD must be incorporated into the

contract (FAR 22.1007). Second, AAM No. 227 only affects prevailing

(i.e., DOL) WDs, and does not affect WDs formed by a predecessor

contractor’s collective bargaining agreement (CBA) under FAR 22.1008-2.

Wage and benefit requirements in these CBA WDs are dictated by the terms

of the CBA.

HOT TOPIC: DOL’s ANNUAL INCREASE OF SCLS

H&W RATES

“These increases do not affect

most contracts that are on a fiscal

year cycle until the start of the new

period of performance under FAR

22.1007, when a new or revised

WD must be incorporated into the

contract.”

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Regarding recreational services EO: “Please take no contract action yet and stay tuned for further instructions.”

HOT TOPIC: MINIMUM WAGES: (2) INCREASE IN MINIMUM WAGE UNDER EXECUTIVE ORDER 13658 (EFFECTIVE 1/1/2019) As noted just above, EO 13658 calls for an annual adjustment to the minimum wage paid to non-exempt

employees working on or in connection with several categories of contracts, including service (SCLS) and

construction (Wage Rate Requirements statute) contracts. DOL initially set the 2015 minimum wage at

$10.10/hour, and on September 4, 2018, announced that the new minimum wage starting January 1, 2019

will be $10.60/hour. Covered contractors must make any necessary increases starting on that date.

DOL service and construction wage determinations currently include the following EO-related statement,

which will be adjusted to reflect the new minimum wage in 2019: “If this contract is covered by the EO, the

contractor must pay all workers in any classification listed on this wage determination at least $10.35 per

hour (or the applicable wage rate listed on this wage determination, if it is higher) for all hours spent

performing on the contract in calendar year 2018.” This means that the contractor must pay the higher of

the EO minimum wage or the wage rate for the particular classification, and increase any wage rate to meet

the EO minimum wage for that year. The contractor is also entitled to a specific price adjustment for any

such increases (FAR 52.222-55(b)(3)). Since most service and construction classifications require payment

of wages that are higher than the EO minimum wage, Contracting Officers should not see many such

requests.

HOT TOPIC: MINIMUM WAGES: (1) EXECUTIVE ORDER (EO) 13838: EXEMPTION FROM EO 13658 FOR RECREATIONAL SERVICES ON FEDERAL LANDS

EO 13658 Establishing a Minimum Wage for Contractors, issued in 2014, established a minimum wage,

subject to annual adjustment, on several categories of federal contracts. On May 25, 2018, President Trump

signed EO 13838 exempting from EO 13658 contracts for seasonal recreational services on federal lands.

Such services include river running, hunting, horseback riding, camping, mountaineering activities, ski

services, and youth camps. However, lodging and food services associated with recreational services are not

exempted. EO 13838 directs agencies to modify existing authorizations and solicitations for contracts and

contract-like instruments affected by the EO by removing clauses requiring compliance with underlying EO

13658. However, the DOL is undertaking rulemaking to amend its regulations to reflect EO 13838, and we

anticipate that the FAR will likewise take subsequent action to implement this EO for FAR-covered

contracts. We don’t anticipate wide applicability to DoN contracts, but if so, please take no contract action

yet and stay tuned for further instructions. You may find EO 13838 and DOL guidance in these hyperlinks.

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SUBJECT OF THE DAY: INCORPORATING SCLS WAGE DETERMINATIONS

It’s that time of year again, when many SCLS-covered contracts are awarded and options are exercised.

These contract actions require the government to incorporate timely and applicable SCLS WDs, which contain

the minimum wages and benefits that must be paid to various classes of service employees. WDs come in two

types, either a WD that is “prevailing” in the locality as established by the DOL (FAR 22.1002-2) or a WD

that is based on a predecessor contractor CBA (FAR 22.1002-3, 22.1008-2). A contract may contain one or

more of each type of WD covering different sets of employees, depending on work location(s), work

scope/classifications, and CBA status. This section summarizes the FAR requirements that Contracting

Officers must follow when incorporating WDs into a SCLS contract.

First, FAR 22.1007 specifies the contract actions that require incorporation of a timely and applicable WD:

new solicitations and contracts; option modifications; contract extensions; scope of work changes whereby

labor requirements are changed significantly; or if a new WD is not triggered by one of these milestones, then

on the annual anniversary date if the contract is subject to annual appropriations, or on the biennial

anniversary date if the contract is not subject to annual appropriations and its proposed term exceeds two

years. Contracting Officers should incorporate a new WD only at these milestones, not when DOL revises a

prevailing WD (which occurs throughout the year for wages and annually for H&W rates) or when a

contractor has entered into a new or revised CBA at some point during the term of the contract.

Second, what does the FAR mean in requiring Contracting Officers to incorporate only “timely” WDs into a

contract? For DOL prevailing WDs, a Contracting Officer must incorporate the most recent DOL WD

revision that is “first posted” on the WDOL website on or before the date of contract award, option

modification, contract extension, or other FAR 22.1007 contract action. However, if work performance starts

more than 30 days after such award, modification, etc., then a Contracting Officer must incorporate any WD

“first posted” on the WDOL website no later than 10 days before start of performance. A Contracting Officer

should never incorporate a WD that is “first posted” after the performance start date. These timeliness

principles are set forth in FAR 22.1012-1.

The same timing rules essentially apply to CBA-based WDs. In this scenario, it is not the “first posted” date

that signifies receipt, but the date the Contracting Officer receives the CBA from the contractor or union.

However, these timing rules apply only if the Contracting Officer has provided notice in writing to the

incumbent contractor and union of the dates of the upcoming FAR 22.1007 contracting actions. The notice

requirement is set forth in FAR 22.1010.

“A Contracting Officer should never

incorporate a WD that is ‘first posted’

after the performance start date.”

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SUBJECT OF THE DAY: INCORPORATING SCLS WAGE

DETERMINATIONS (Cont’d) Let’s look at the following examples to illustrate the timeliness principles:

Option MOD is exercised Sept. 15, and performance starts on Oct. 1. Result? DOL WD revisions

“first posted” up to and including Sept 15 must be incorporated into the option MOD.

Contract is awarded on August 15, and performance starts on Oct. 1. Result? DOL revisions “first

posted” up to and including Sept. 21 must be incorporated into the contract. Why? Because

performance starts more than 30 days after award.

Option MOD is exercised on Sept. 29, and performance starts on Oct. 10. Contractor delivers a

brand new CBA on Sept. 28. Result? New CBA wages and benefits must be incorporated into the

contract as the WD, because it was received before the MOD date [Note: because the CBA in this

example is brand new, it must be in effect during the prior contract period, i.e., before Oct. 10].

Third, what are the procedures for obtaining WDs? FAR 22.1008-1 gives Contracting Officers the

option to obtain a WD either through the WDOL website or through DOL’s e98 system, which may be

accessed through the WDOL website or through DOL’s website. Contracting Officers may obtain

“standard” WDs at the WDOL website for all geographic areas in the U.S., as well as “non-standard”

WDs covering specific industries, geographic areas, and/or federal agencies and which may only be

used as set forth in the WD. Please keep in mind that standard WD identifying numbers can and do

change, so when incorporating a revised WD into a successor contract or option MOD, double-check

to ensure that the WD covers the correct geographic area (state and county).

FAR 22.1008-1(a) requires Contracting Officers to use the e98 process when the WDOL website does

not contain the applicable WD for the contract work. This might occur when a WDOL website WD is

unavailable due to a technical glitch or when an existing prevailing WD contains no classification to

perform any of the contract work. In the latter scenario, DOL will on request provide a WD specific to

that contract if it is over $2500 and requires more than five service employees. If the contract involves

five or fewer employees DOL may elect not to provide a WD, and in that case, the standard Fair Labor

Standards Act minimum wage (applicable to virtually all U.S. employers) would be controlling on the

contract. DOL has assembled a helpful instruction page to assist personnel using the e98 system.

To facilitate selection of the applicable WD, FAR 22.1008-1(e) requires Contracting Officers to collect

certain information: the classes of employees to be used on the contract (using the SCA Directory of

Occupations as a guide, seeking assistance of cognizant customer/technical personnel in using the

Directory, see PGI 22.1008-1); each classification’s federal grade equivalent; the location(s) of work

performance; and whether Section 4(c) of the SCLS applies to the contract. This last element

essentially requires the Contracting Officer to determine whether the incumbent contractor is party to a

CBA, which will in most circumstances form the basis for the WD under a successor contract for

similar work in the same locality. The topic of Section 4(c) is a subject unto itself and will be covered

in a future newsletter. That entry will basics on 4(c), substantial variance and arm’s length negotiation

proceedings, and prohibited contingencies. However, the Q&A Corner section below covers a

recurring question regarding CBA-based WDs.

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Q&A CORNER: “Q&A Corner” is a section of the newsletter

that will allow readers to have input into the newsletter. Please

e-mail your question to Thomas O’Connor or Lynn Forbes at the

contact info on Page 1 above. We will then share the Q&A in a

future newsletter. Identities will be kept anonymous. We look

forward to your challenging and insightful questions.

Scenario: Current SCLS contract with Alpha, Inc. will expire on

Sept. 30, 2018 [all dates are in 2018]. On Sept. 1, Beta, Inc. was

awarded the follow-on contract for the same work at the same

location, performance starting on Oct. 1. Alpha's contract

contains a CBA-based wage determination (WD), which Alpha

renegotiated to include a wage increase of $1.00/hour for each

CBA classification effective Oct. 1. Alpha delivered this revised

CBA to the Contracting Officer before Sept. 1.

Question: Is the Contracting Officer required to incorporate

Alpha's revised CBA (with the new wage rates effective Oct. 1)

into Beta's contract as the applicable contract WD?

Answer: Yes, pursuant to Section 4(c) of the SCLS. First, the

CBA was timely received by the Contracting Officer, before

Beta's contract award. Note that if performance commenced

more than 30 days after award, then the contractor or union

could timely provide a revised CBA to the Contracting Officer

not less than 10 days before performance starts. Second, Beta

must pay the Oct. 1 wage increases even though Beta had no part

in negotiating them. As successor contractor, Beta must pay its

service employees the wages and benefits, including

"prospective increases," at least equal to those agreed upon by

Alpha, the predecessor contractor. See FAR 22.1008-2(b). The

Oct. 1 wage increases are "prospective increases" which the

SCLS requires Beta to pay, even though Alpha negotiated them.

Please note that Alpha's CBA serves as Beta's contract WD for

the first contract period only. If during the base period, Beta

does not negotiate its own CBA with the union, the WD for any

first option year will be the applicable prevailing (DOL) WD in

the locality. Please further note that the CBA is not valid if it

failed to result from arm's-length negotiations, contains

prohibited contingencies or if the CBA rates are at "substantial

variance" from the prevailing rates for similar services in the

locality. These caveats to the application of Section 4(c) of the

SCLS are subject to Department of Labor hearings and findings,

and as noted above, will be covered in a future newsletter.

“As successor contractor, Beta must

pay its service employees the wages

and benefits, including "prospective

increases," at least equal to those

agreed upon by Alpha, the

predecessor contractor.”