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The Other Shoe Drops – First New Regulations, Now More Enforcement

The current administration in Washington has added a number of new employment-related requirements for federal government contractors during the past three years. (The president can implement such changes by executive order without needing the approval of Congress.) Now that regulations are in place, the government is taking a more aggressive position on enforcement of the new and previously existing requirements for government contractors.

A Virginia-based technology company has recently been hit with a $1.5 million bill for violations of the McNamara–O’Hara Service Contract Act of 1965 for failing to pay the wage rate that the U.S. Secretary of Labor found to be the “prevailing wage” for that job classification in that locality, as well as fringe benefits, to its direct employees and the employees of its subcontractors. This is a timely reminder that the U.S. Department of Labor (“DOL”) under the current administration is actively scrutinizing the legal compliance of federal contractors and subcontractors and bringing significant lawsuits against violators. I have written previously in this blog about the risk to employers of failing to realize that they are federal contractors or subcontractors and, as a result, exposing themselves to significant liabilities. But even employers that are fully aware of their covered status need to keep on their toes to make sure that they are up to speed on their obligations. Although working on government contracts can be a lucrative business, there is also a heightened regulatory burden on employers that are covered under the Federal Acquisition Regulations. In the last several years, we have seen a range of new requirements that have come into effect or are in the pipeline, including an increase in minimum wage of $10.10, a prohibition on retaliation against employees who disclose or discuss their compensation, an obligation to submit summary data on compensation paid to workers (including data regarding gender and race), and paid sick leave for employees.

The DOL has consistently demonstrated its willingness to investigate and bring enforcement proceedings against federal contractors and subcontractors that fail to comply with their ever-increasing obligations. The monetary and reputational damage can be significant. In-house counsel and compliance departments need to ensure that they are fully up to speed on the current status of the new laws, as well as make sure that they are in compliance with existing legal requirements.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.