Ch-ch-ch Changes? What the Transition Could Mean for Government Contracts and Wage and Hour Policy

“Ch-ch-ch-changes
(Turn and face the strain)
Ch-ch-changes
Oh, look out you rock 'n rollers”

— David Bowie

As I write this, debate rages about whether former Vice President Biden should be called President-elect Biden or whether President Trump will continue in office. While there seems to be an ever-increasing recognition that the outcome of the election is sealed, the transition process has not begun pending the customary “ascertainment” of the apparent winner of the election that would trigger the wheels of transition.

Regardless of the ultimate outcome of the electoral process, government contractors wonder whether there will be wholesale changes for them, particularly with respect to their employment policies. Well, as with most things, the unsatisfactory answer is yes and no. Here are some examples of what might be on the horizon:

DOL Enforcement Priorities: Just last year, the Wage and Hour Division (“WHD”) celebrated the recovery of a record amount of back pay awards for employees; however, 2020 might be a different story due to the impact of the coronavirus crisis on the WHD’s resources and priorities. We have witnessed the slowing of enforcement activities; however, up until this year’s crisis, DOL was pursuing violations of the Fair Labor Standards Act (FLSA) and the Service Contract Act (SCA) with considerable vigor even if some policies had been modified to the ostensible benefit of employers.

Wage and Hour Opinion Letters: For decades, the WHD issued advisory opinions in response to questions posed by the public about whether a particular practice complied with the FLSA and related laws. While these opinions did not have the force of law, they regularly are cited by Courts as persuasive authority regarding DOL’s interpretation of its own regulations. Further, adherence to them can establish a “good faith” defense under the FLSA. This practice, however, came to a grinding halt in the Obama Administration, which revoked some Bush-era opinions and issued no opinions after 2009. During that period, DOL issued “administrator interpretations” that were broad statements of policy rather than opinions based on specific fact scenarios. In 2017, the Trump Administration reinstated the Bush Administration opinions and began issuing opinion letters in 2018 and has since issued nearly 60 opinions, the most recent of which were issued on November 3 (i.e., election day). It wouldn’t be surprising if a Biden administration resumed the Obama-era preference for administrator interpretations and it might even rescind some of the Trump-era opinions.

Independent Contractor rule: The WHD recently published a revised version of DOL’s definition of independent contractor status. It was fast-tracked with a limited 30-day comment period. Presumably, the administration hopes it will finalize it before the commencement of the next administration. If it’s successful, will a Biden administration rescind it? Surely, there will be many who demand it be reversed. However, reversal will have to go through the usual regulatory process. Despite the partisan bickering over this rule, it truly doesn’t effect an actual change in the law. It merely rearranges the analytical deck chairs. Moreover, the IRS definition and the recent California changes remain the same. Hence, this is an example of a non-change change.

Service Employee Nondisplacement Rule: Last year, President Trump rescinded President Obama’s executive order that required successor contractors to give a right of refusal to the employees of a predecessor service contractor’s employees for comparable positions under the new contract. Since this will be an easy reversal, the nondisplacement rule no doubt will return. Given that the rule had been on the books for roughly 10 years, the impact of reversal after less than a year and a half shouldn’t be an earth shattering change. Whether the rule is a good idea is another story.

Diversity Training Executive Order: Yep. This Executive Order is toast. The EO required new federal contracts to include a clause that ostensibly forbade contractors from providing “any workplace training that inculcates in its employees any form of race or sex stereotyping or any form of race or sex scapegoating.” This would pose quite a quandary for federal contractors who otherwise are required to provide employee harrassment training. Would the new prohibition require the revision of scores of slide decks? Given the uncertainty cause by this executive order, few are likely to shed tears over its demise.

Fair Pay and Safe Workplaces: The Obama Administration issued regulations that required federal contractors to disclose a wide range of employer violations—whether they were adjudicated or not—that would be factored into procurement decisions. Dubbed by many as the “blacklisting” rule, this spawned a firestorm in the federal contracting community. The Republican controlled Congress put the kibosh on this regulation under the Congressional Review Act. The Biden campaign’s labor policies put the reinstatement of this rule front and center on the agenda. However, this will be a tall order because the Congressional Review Act prohibits new regulations on the subject without Congressional approval. Even if Senate control flips after the Georgia runoffs, the reversal of this policy seems like a tall order.

For now, federal contractors and employers at large should be attentive to the possibility of change in the coming months. However, this is not a time for undue alarm. The fundamentals of compliance best practice remain the same. Be careful when you classify employees. Maintain thorough records. Establish sound practices that limit employee misconduct and prohibit discrimination. Provide effective training to promote a compliance-oriented workplace.

And, if in doubt, it never hurts to seek outside advice. Indeed, obtaining guidance regarding compliance with the FLSA can establish that an employer made a good faith effort to comply with its requirements. Beyond that, enforcement authorities often appreciate sincere efforts to comply with the law.