Division of Regulations, Legislation, and Interpretation
Wage and Hour Division
U.S. Department of Labor
Re: RIN 1235-AA41, Comments in Response to Proposed Rulemaking: Increasing the Minimum Wage for Federal Contractors
To Whom It May Concern:
The National Employment Lawyers Association (“NELA”) is submitting these comments regarding the U.S. Department of Labor’s Notice of Proposed Rulemaking (“NPRM”) on the increased minimum wage for federal contractors.
NELA is the largest professional membership organization in the country comprised of lawyers who represent employees in labor, employment, wage and hour, and civil rights disputes. Our mission is to advance employee rights and serve lawyers who advocate for equality and justice in the American workplace. NELA and its 69 circuit, state, and local affiliates have a membership of over 4,000 attorneys who are committed to working on behalf of those who have faced illegal treatment in the workplace. NELA has filed numerous amicus curiae briefs before the United States Supreme Court and other federal appellate courts regarding the proper interpretation of federal civil rights and worker protection laws and comments on relevant Notices of Proposed Rulemaking. NELA also engages in legislative advocacy on behalf of workers throughout the United States. Many NELA members represent workers whose employers have failed to pay them the minimum wages guaranteed by federal wage-hour statutes and regulations. Thus, NELA has both an interest in, and extensive expertise, regarding the practical impact of any proposed modifications.
NELA strongly supports President Biden’s April 27, 2021, Executive Order 14026, “Increasing the Minimum Wage for Federal Contractors” and much of the text of its proposed implementing regulations. NELA advocates for a $15 minimum wage for all workers, and so it is encouraged by President Biden’s decision to raise the floor for the employees of federal contractors to that wage. The President’s Order and this Proposed Rule build on a long tradition of the federal government supporting living wages for government-funded work through its rules and subsidies—in particular, the Davis-Bacon Act of 1931 and the McNamara-O’Hara Service Contract Act of 1965. However, NELA recommends that the Rule be modified in at least four ways in order to strengthen enforcement of the Rule.
I. The Rule Should Be Clear That It Does Not Preempt Local Efforts To Enforce Prevailing Wage Rates.
First, NELA recommends a change to Section 23.10(c) of the Proposed Rule. As currently written, that subsection provides as follows:
(c) Scope. Neither Executive Order 14026 nor this part creates or changes any rights under the Contract Disputes Act, 41 U.S.C. 7101 et seq., or any private right of action. The Executive Order provides that disputes regarding whether a contractor has paid the minimum wages prescribed by the Order, to the extent permitted by law, shall be disposed of only as provided by the Secretary in regulations issued under the Order. However, nothing in the Order or this part is intended to limit or preclude a civil action under the False Claims Act, 31 U.S.C. 3730, or criminal prosecution under 18 U.S.C. 1001. The Order similarly does not preclude judicial review of final decisions by the Secretary in accordance with the Administrative Procedure Act, 5 U.S.C. 701 et seq.
The Department of Labor does not currently have—and has never had—sufficient resources to police enforcement of the many federal laws that require private-sector employers to pay minimum or prevailing wages.[1] Those laws include the Fair Labor Standards Act, which mandates the payment of a federal minimum hourly wage and the payment of a 50 percent premium to the hourly rate after 40 hours in a week; the Davis-Bacon Act, which requires the payment of the locally prevailing wages and benefits for construction work performed on certain projects; and the Service Contract Act, which requires the payment of prevailing wages and benefits by certain government contractors. There are simply far too many employers and far too few DOL employees.
Unfortunately, it has become increasingly common for employers covered by these and similar laws to disregard these wage laws and instead pay their employees lower wages and benefits than are required.[2] In the experience of NELA members, supported by findings by Congressional staff, the Government Accountability Office, and employee advocates, federal contractors are some of the worst offenders.[3]
This unlawful behavior breeds disrespect for the law and has a damaging effect on the contracting process. Moreover, the current lack of enforcement of wage-hour laws permits and incentivizes repeat offenders.[4] Companies that bid for government work and intend to abide by the wage laws, find themselves placed at a competitive disadvantage when they bid against other companies that have no intention of abiding by those laws.
Minimum and prevailing wage requirements exist to protect the subject employees as well as competing contractors. For most employees, their best bet at getting their employer to pay the required levels of pay and benefits is through a lawsuit or the threat of one.[5] This is the informed experience of NELA and its members.
The Secretary has placed a special notification in these regulations to the effect that “nothing in the Order or this part is intended to limit or preclude a civil action under the False Claims Act, 31 U.S.C. 3730, or criminal prosecution under 18 U.S.C. 1001.” NELA wholeheartedly supports this statement. Additionally, NELA recommends that this subsection of the Rule be amended to make it clear that state law enforcement of the minimum wage, including private rights of action under state law, are not preempted by the federal wage regulations.
Some jurisdictions now recognize that the epidemic of wage theft requires stepped up legal remedies to combat it. For example, the District of Columbia recently enacted the District of Columbia Wage Payment and Collection Law (“WPCL”), D.C. Code § 32-1301 et seq., which provides a private right of action to enforce wage guarantees that employers in D.C. must provide. This includes a private right of action to enforce prevailing-wage rates of whatever variety, along with strong, meaningful remedies.
The U.S. District Court for the District of Columbia has rejected employers’ arguments that the amended WPCL is preempted by federal law and their argument that enforcement of prevailing-wage requirements must be left solely and exclusively to the Department of Labor. Garcia v. Skanska USA Bldg., 324 F. Supp.3d 76, 80 (D.D.C. 2018) (rejecting employers’ argument that federal law preempted the DCWPCL); Dow v. HC2 Inc., 2019 WL 5960198 at *3 (D.D.C. Nov. 13, 2019) (endorsing the Garcia decision with respect to enforcement of prevailing-wage rates). Employers make those arguments because they fear having to defend their actions in court and are confident that they can evade DOL enforcement.
Accordingly, NELA asks the Secretary to change the sentence that references the compatibility of the Rule with other enforcement methods, by adding a statement that the Secretary does not intend for these regulations to displace any state or local law meant to enforce prevailing-wage rates, including the minimum rates set forth in the Executive Order.
II. The Rule Should Require Contract Language Stating That Compliance Is A Material Condition For Payment.
NELA also recommends that the Rule be modified to make clear that wage-hour laws are at the heart of the bargain between the Government and its contractors, a bargain which is enforced in part through the False Claims Act (FCA).
The False Claims Act has proven to be a useful tool to police contractors’ statements of compliance with certain wage-hour laws. For example, there have been several settlements of False Claims Act cases alleging that employers falsely certified compliance with Davis-Bacon prevailing wage requirements. United States ex rel. Owens and Reba v. Gilbane, Inc. et al., Civ. No. 11-cv-271 (D. Md. 2016)[6]; United States ex rel. Frias v. Boston Properties Management, Inc., et al., Civ. No. 12-cv-1170 (E.D.Va. 2015); United States ex rel. Whitley v. Advance Power and Lighting, Inc., et al., Civ. No. 12-cv-3835 (N.D. Ga. 2014). Federal courts have also endorsed False Claims Act liability for false certification of compliance with the Service Contract Act. U.S. ex rel. Sutton v. Double Day Office Servs., Inc., 121 F.3d 531, 532 (9th Cir. 1997) (holding that false statements of compliance with Service Contract Act stated claim under the False Claims Act); United States ex rel. Contech v. IKON Office Sols. Inc., 27 F. Supp. 3d 80, 86-87 (D.D.C. 2014); United States ex rel. Head v. Kane Co., 798 F. Supp. 2d 186, 194-201 (D.D.C. 2011).
An important issue for False Claims Act enforcement of wage-hour law compliance certification is whether such certifications are material to the Government’s decision to pay covered contractors. Materiality is an essential element of FCA causes of action alleging false statements to the Government in support of claims for payment. Materiality under the FCA requires an inquiry into whether a false statement has “a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property.” 31 U.S.C. § 3729(b)(4). See Universal Health Services v. United States ex rel. Escobar, –– U.S. ––, 136 S. Ct. 1989 (2016).
A recent decision by the United States Court of Appeals for the Third Circuit upheld a False Claims Act judgment for Davis-Bacon violations and made clear that compliance with wage-hour laws is material to the Government’s decision to pay covered contractors. United States ex rel. International Brotherhood of Electrical Workers Local Union No. 98 v. The Farfield Company, No. 20-1922, 2021 WL 2933212, *1 (3d Cir. Jul. 13, 2021). The Third Circuit held that compliance with prevailing wage requirements goes “to the very essence of the bargain” between the Government and the contractor. Farfield at *22-23 (citing the Supreme Court’s determination of the False Claims Act materiality standard in Escobar, 136 S. Ct. at 2003 & n.5 (2016)).
To buttress this and other statements from the courts that wage requirements are material, NELA recommends that an express statement of materiality be added to the rule and to all covered contracts. Such a statement will make it abundantly clear to employers that the increased minimum wage for federal contractors is material to the Government’s decision to pay. The statement will also send a signal to the Department of Justice that they should aggressively prosecute meritorious cases alleging false certification of minimum wage compliance. Therefore, Appendix A to Part 23, subsection (d) should be amended as follows:
(d) Contract Suspension/Contract Termination/Contractor Debarment. Full compliance with the minimum wage requirements of Executive Order 14026 and 29 CFR part 23 is a material condition for payment under this contract. In the event of a failure to pay any worker all or part of the wages due under Executive Order 14026 or 29 CFR part 23, or a failure to comply with any other term or condition of Executive Order 14026 or 29 CFR part 23, the contracting agency may on its own action or after authorization or by direction of the Department of Labor and written notification to the contractor, take action to cause suspension of any further payment, advance or guarantee of funds until such violations have ceased.
III. The Rule Should Require Covered Contracts To Expressly State That Workers Are Third-Party Beneficiaries
To give employees an additional mechanism to combat wage theft, NELA recommends that the Department consider modifying the language in covered contracts in Appendix A of the Rule to include the following: “Employees of [contractor] are third-party beneficiaries of the minimum wage mandated by [the Rule] and have all common law rights and remedies of a third party beneficiary to enforce their entitlement to said minimum wage.”
By requiring covered contracts to designate workers as third-party beneficiaries, DOL can enable workers to bring private causes of action to recover unpaid wages, even in states without prevailing wage and private wage enforcement laws. The Supreme Court requires such third-party beneficiary status to be expressly stated in the contract, not merely in an executive or regulatory statement of policy. Astra USA, Inc. v. Santa Clara County, 563 U.S. 110, 118 (2011) (incorporation of statutory obligations does not create third-party beneficiary cause of action); G4S Tech. LLC v. United States, 779 F.3d 1337, 1340-41 (Fed. Cir. 2015) (“standard compliance” with regulations will “rarely. . . impart liability to a third party”); Kremen v. Cohen, 337 F.3d 1024 (9th Cir. 2003) (applying common law presumption that a contract must establish an “intention to grant the third party enforceable rights”) [internal quotes omitted.]
Therefore, the Rule should take the easy and permissible step of requiring covered contracts to expressly incorporate Congress and the Executive’s policy that workers are third-party beneficiaries of the federal contractor minimum wage. See Exec. Order No. 14026, Sec.1 An executive order can create a private right of action “only if it is issued pursuant to a statutory mandate or delegation of congressional authority” and “only if it was intended to create a private cause of action.” Chen Zhou Chai v. Carroll, 48 F.3d 1331, 1338 (4th Cir. 1995). Here, Executive Order 14026 was issued pursuant to the Procurement Act, which broadly authorizes the President to “prescribe policies and directives that the President considers necessary to carry out” the Act. 40 U.S.C. § 121(a). Third-party beneficiary status is an effective mechanism to enforce the substantive policy that “Raising the minimum wage enhances worker productivity and generates higher-quality work by boosting workers’ health, morale, and effort. . . .” Exec. Order No. 14026, Sec.1.
IV. The Rule Should Require Contractors To Respond To Employee Complaints And Produce Evidence Of Compliance
NELA also requests that within thirty days of any employee complaint regarding work on covered contracts for which the employee was improperly compensated, contractors are automatically sent a letter by DOL seeking a response to the allegations and documentary evidence that contractors have in fact have been paid the minimum wage. Employees and/or their representatives should be copied on this correspondence, including the contractor’s evidence of payment of minimum wage. To the extent that this requirement would constitute a certification covered by 41 U.S. Code § 1304, the Department should request that the Administrator for Federal Procurement Policy provide written approval for the certification, in consultation with the Federal Acquisition Regulatory Council. An automatic requirement that covered contractors provide a response to any employee complaint with documentary evidence that the worker has been paid the minimum wage will greatly facilitate enforcement of the federal contractor minimum wage without requiring substantial additional investigatory resources for the Department.
NELA strongly supports Executive Order 14026, “Increasing the Minimum Wage for Federal Contractors” and urges you to implement the recommendations set out above to ensure enforcement of this important change.
Thank you for your consideration of these comments and please do not hesitate to reach out to Laura Flegel (lflegel@nelahq.org) if you had additional questions.
Sincerely yours,
Laura M. Flegel
National Employment Lawyers Association
Director of Legislative & Public Policy
[1] “In 1948, for example, the WHD employed 1,000 investigators and was responsible for protecting 22.6 million workers. By 2014, it employed about the same number of investigators (1,100) but was now responsible for protecting 135 million workers.” Daniel J. Galvin, Deterring Wage Theft: Alt-Labor, State Politics, and the Policy Determinants of Minimum Wage Compliance, 14 Perspectives on Politics (2) 324, 325 (2016), https://doi.org/10.1017/S1537592716000050. “As of May 1, 2020, for example, [the Wage and Hour Division] employed 779 investigators to protect more than 143 million workers. . . the division employed approximately one investigator per 183,568 workers, a critically insufficient investigator-to-worker ratio.” Janice Fine et al., Strategic enforcement and co-enforcement of U.S. labor standards are needed to protect workers through the coronavirus recession, Washington Center for Equitable Growth, Jan. 14, 2021, https://equitablegrowth.org/strategic-enforcement-and-co-enforcement-of-u-s-labor-standards-are-needed-to-protect-workers-through-the-coronavirus-recession. “The International Labour Organization has estimated a reasonable benchmark is one investigator for every 10,000 workers, a standard that calls for approximately 14,300 investigators in the United States.” Id., citing International Labour Office, “Strategies and Practice for Labour Inspection” (2006), https://www.ilo.org/public/english/standards/relm/gb/docs/gb297/pdf/esp-3.pdf.
[2] See, e.g., David Cooper & Teresa Kroeger, Employers steal billions from workers’ paychecks each year, Economic Policy Institute, May 10, 2017, https://www.epi.org/publication/employers-steal-billions-from-workers-paychecks-each-year/. (“We find that [in the 10 most populous states] 2.4 million workers lose $8 billion annually (an average of $3,300 per year for year-round workers) to minimum wage violations—nearly a quarter of their earned wages. This form of wage theft affects 17 percent of low-wage workers, with workers in all demographic categories being cheated out of pay.”
[3] U.S. Senate Health, Education, Labor, and Pensions Committee, Acting Responsibly? Federal Contractors Frequently Put Workers’ Lives and Livelihoods at Risk, December 11, 2013, https://www.help.senate.gov/imo/media/doc/Labor%20Law%20Violations%20by%20Contractors%20Report.pdf; Government Accountability Office, Federal Contracting: Assessments and Citations of Federal Labor Law Violations by Selected Federal Contractors, GAO-10-1033, September 2010, http://www.gao.gov/assets/310/309785.pdf (“Of the 50 largest WHD wage assessments during fiscal years 2005 through 2009, 25 wage assessments were made against 20 companies that received federal contracts in fiscal year 2009”).
[4] Only 2 percent of SCA violators face debarment proceedings. Government Accountability Office, Actions Needed to Improve Department of Labor’s Enforcement of Service Worker Wage Protections, GAO-21-11, October 2020, https://www.gao.gov/assets/gao-21-11.pdf
[5] See Galvin, Deterring Wage Theft (2016), at 340-341 (finding that states that implemented treble damages in civil actions for minimum wage violations saw statistically significant drops in violations by employers—and had a more significant effect than any other wage enforcement mechanism).
[6] “Paige Industrial Services Agrees To Resolve False Claims Act Allegations,” U.S. Department of Justice, Feb. 22, 2016, https://www.justice.gov/usao-md/pr/paige-industrial-services-agrees-resolve-false-claims-act-allegations.
