There were a few actions this month that serve as important reminders to nonprofits that noncompliance with ever-changing federal funding requirements, especially ethical requirements, can result in liability not just to the organization, but to individuals personally as well. In addition, the U.S. Department of Labor (DOL) issued a proposed rule for paid sick leave for federal contractors.
Agency Implementation of the Uniform Guidance Continues to Shift Grantee's Requirements under New Awards
On February 16, 2016, several federal agencies finalized their implementation of the Uniform Guidance, including the Office of the Chief Financial Officer, Farm Service Agency, Commodity Credit Corporation, National Institute of Food and Agriculture, Rural Utilities Service, Rural Business-Cooperative Service, and Rural Housing Service. While many agencies have been slow to officially adopt (and even slower to implement) the Uniform Guidance, the specific adoption and implementation of the Uniform Guidance for these agencies reminds us of the importance of assessing each award with each agency for compliance. Nonprofit grantees should establish a protocol for reviewing the requirements for each award. Consider the following actions:
- Designate a point person to oversee compliance with each requirement.
- Review each requirement. Ensure that you have reviewed each regulation or policy guidance incorporated by reference. Remember that while the Uniform Guidance is meant to provide consistency, each award and each agency is different, and must be treated individually.
- Determine how the organization will comply with each requirement. Consider drafting a compliance matrix that assigns responsibility for compliance with each requirement. Track the versions of this compliance matrix as the grant requirements are modified or otherwise clarified, and as the facts on the ground change compliance requirements. This compliance matrix can act as a tool to document your organization's rationale as to why it can certify confidently that it is compliant with all requirements.
Failure to follow changing regulatory requirements can have a significant impact, not just for the organization, but for individuals within the organization as well.
USAID Contractor Employee's Sentence Reflects the Policy Shift to Examination of Individual Liability Early in an Investigation
According to the U.S. Department of Justice (DOJ), a former nonprofit contractor employee was sentenced to 46 months in prison for his role in a bribery scheme involving a federal program in Afghanistan and conspiracy to structure financial transactions to avoid certain reporting requirements.
This case is a significant reminder, especially in the post-Yates Memorandum environment, that nonprofits should be particularly mindful of adhering to federal requirements. The Yates Memorandum, a policy memorandum titled "Individual Accountability for Corporate Wrongdoing" and issued by Deputy U.S. Attorney General Sally Yates on September 9, 2015, signaled a policy shift by the DOJ to the prosecution of more individuals in corporate fraud cases. In doing so, the Yates Memorandum established six guidelines intended to "strengthen [DOJ's] pursuit of corporate wrongdoing":
- "To be eligible for any cooperation credit, corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct";
- "Both criminal and civil corporate investigations should focus on individuals from the inception of the investigation";
- "Criminal and civil attorneys handling corporate investigations should be in routine communication with one another";
- "Absent extraordinary circumstances, no corporate resolution will provide protection from criminal or civil liability for any individuals";
- "Corporate cases should not be resolved without a clear plan to resolve related individual cases before the statute of limitation expires and declinations as to the individual in such cases must be memorialized"; and
- "Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual on considerations beyond that individual's ability to pay."
Given the foregoing, and the clear interest of the DOJ in pitting organizations against their employees, it is particularly important for nonprofits to take the steps summarized above, among others, to ensure regulatory and ethical compliance.
DOL Proposes Rule Which Would Require Nonprofit Federal Contractors to Provide Employees with Paid Sick Leave
On February 25, 2016, the DOL published its Notice of Proposed Rulemaking implementing Executive Order 13706, Establishing Paid Sick Leave for Federal Contractors (NPRM). Executive Order 13706, which was signed by President Obama on September 7, 2015, requires parties, including nonprofits, who enter into contracts with the federal government to provide covered employees with up to seven days of paid sick leave on an annual basis, for such reasons as the employee's medical condition, care for a close family member's medical condition and absences resulting from domestic violence, sexual assault, and stalking.
Contracts Covered. Pursuant to the NPRM, Executive Order 13706 applies to four types of a nonprofit's contractual agreements:
- Procurement contracts for construction covered by the Davis-Bacon Act (DBA);
- Service contracts covered by the McNamara-O'Hara Service Contract Act (SCA);
- Concessions contracts, including any concessions contracts excluded from the SCA by the Department's regulations at 29 CFR 4.133(b); and
- Contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public.
A nonprofit's grant agreements are one of the few contractual agreements excluded from coverage. Executive Order 13706 applies only to new nonprofit federal contracts resulting from solicitations issued on or after January 1, 2017 or that are awarded outside the solicitation process on or after January 1, 2017.
Employees Covered. The NPRM provides that the Executive Order applies to any individual engaged in performing work on or in connection with a contract covered by the Executive Order whose wages under such contract are governed by the SCA, DBA, or Fair Labor Standards Act (FLSA). It is important to note that, unlike the Minimum Wage Executive Order, this proposal also covers a nonprofit federal contractor's employees who are exempt from the FLSA minimum wage and overtime provisions.
Accrual and Use of Leave. Under the NPRM, employees of covered nonprofit federal contractors would accrue at least one hour of paid sick leave for every 30 hours worked, up to a maximum of 56 hours per year. Employees would be permitted to carry over accrued, unused paid sick leave from one year to the next, but would not be entitled to payment for any accrued, unused leave upon separation of employment. However, nonprofit federal contractors would be required to reinstate an employee's accrued, unused paid sick leave if the employee is rehired by the same nonprofit federal contractor within 12 months following separation of employment. The proposal notes that, if certain conditions are met, a covered nonprofit federal contractor's existing paid time off policy may satisfy the requirements of the Executive Order.
Interested parties have only 30 days to provide comments on the NPRM.