Late last week the House of Representatives narrowly approved the inclusion of an amendment in the Department of Defense (DoD) appropriations bill that would prohibit the agency from using contractors that have incurred Fair Labor Standards Act (FLSA) violations within the past five years. Such violations would include a finding of fault and liability in any civil, criminal, or administrative proceeding, including entering into wage and hour conciliation agreements or consent decrees that include a “finding of fault.”
The House passed the underlying funding bill, the Department of Defense Appropriations Act for FY 2015 (H.R. 4870), on Friday, June 20. The amendment at issue (H.Amdt. 926) was offered by Rep. Keith Ellison (D-MN), and reads as follows:
Sec. __. None of the funds made available in this Act may be used to enter into a contract with any person whose disclosures of a proceeding with a disposition listed in section 2313(c)(1) of title 41, United States Code, in the Federal Awardee Performance and Integrity Information System include the term ``Fair Labor Standards Act.''
The “dispositions” listed in section 2313(c)(1) include:
(A) In a criminal proceeding, a conviction.(B) In a civil proceeding, a finding of fault and liability that results in the payment of a monetary fine, penalty, reimbursement, restitution, or damages of $5,000 or more.
(C) In an administrative proceeding, a finding of fault and liability that results in—
(i) the payment of a monetary fine or penalty of $5,000 or more; or
(ii) the payment of a reimbursement, restitution, or damages in excess of $100,000.
(D) To the maximum extent practicable and consistent with applicable laws and regulations, in a criminal, civil, or administrative proceeding, a disposition of the matter by consent or compromise with an acknowledgment of fault by the person if the proceeding could have led to any of the outcomes specified in subparagraph (A), (B), or (C).
(E) In an administrative proceeding—
(i) a final determination of contractor fault by the Secretary of Defense pursuant to section 823(d) of the National Defense Authorization Act for Fiscal Year 2010 (10U.S.C. 2302 note; Public Law 111–84); or
(ii) a substantiated allegation, pursuant to section 1704(b) of the National Defense Authorization Act for Fiscal Year 2013, that the contractor, a subcontractor, or an agent of the contractor or subcontractor engaged in any of the activities described in section 106(g) of the Trafficking Victims Protection Act of 2000 (22 U.S.C. 7104(g))
In his remarks introducing the measure, Rep. Ellison explained that the purpose of the amendment is to guarantee: “if there is a Federal contractor who has been found to engage in wage theft, that they may not benefit from this appropriation.”
The definition of “wage theft” used in this bill, however, appears to somewhat broad. Moreover, Ellison relies on a report issued by Democrats on the Senate Committee on Health, Education, Labor, and Pensions finding that “32 percent . . . of the largest Department of Labor penalties for wage theft were levied against Federal contractors.”
The next steps on DOD funding legislation are uncertain. The Senate has not yet considered its own DoD appropriations bill. Nonetheless, federal contractors should consider the House vote on the Ellison amendment as another signal that they are facing increased scrutiny of their wage and hour practices and be aware of increased risks if the provision does become law.