Thanks to FosterThomas for a great TechFocus Program: Compliance Challenges for Small Businesses doing Business with the Government Thursday, July 28, 2011, 7:30 am - 9:30 am Missed the program? Don\'t miss the resources: Here are the slides from the presentation!

1. 7/28/2011
Government Contractor
Compliance Seminar
July 28, 2011
HR Agenda
• Sexual Harassment & Discrimination
• Business Conduct and Ethics
• Executive Order 11246 – Affirmative Action
• FLSA Exempt vs. Non-Exempt Classifications
• I-9 Requirements & Drug Free Workplace Act
• Business Risk
– Employment Practices Liability (EPL)
– Professional Liability (Errors & Omissions)
– Directors & Officers Liability (D&O)
– Defense Base Act
Sexual Harassment
What Supervisors Need to Know
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2. 7/28/2011
Why You Need to Know
Sexual harassment and Discrimination:
• Damages organizations
• Undermines trust and respect
• Exposes companies to damaging liabilities
• Non-productive. Want to keep it out of workplace &
if it enters the workplace deal with it promptly and
effectively.
Harassment and the Law
Governed by the EEOC. Four
Elements under the law that
define sexual Harassment:
I. Based on Sex
II. Unwelcome
III. Sufficiently Severe or
Pervasive
IV. Conduct Is Imputable on
Some Factual Basis
Two Forms
• Quid Pro Quo
• Hostile Work Environment
Sexual Harassment
Quid Pro Quo
I. Term or Condition of Employment.
II. Affects the decisions about a person’s
job or career.
III. Interferes with an individuals work performance
or creates an intimidating or offensive work
environment.
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3. 7/28/2011
Hostile Work
Environment
Sexual conduct that has the purpose or effect of
unreasonably interfering with an individual’s work
performance or creating an intimidating or offensive
work environment. Effects their ability to perform
their job.
Perceived by the victim and a reasonable person.
Employer Protection
Affirmative Defense
This defense can be invoked where the employer can
demonstrate that:
(1) it exercised reasonable care to prevent and
promptly correct any sexually harassing behavior,
and
(2) the employee unreasonably failed to take
advantage of any preventative or corrective
opportunities provided by the employer or to
otherwise avoid harm
Effective Policies
are Critical
• Provide a clear
statement of your
position against sexual
harassment
• Promote compliance
and prevention by
defining responsibilities
• Protects employee
rights and fosters
respect for all
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4. 7/28/2011
Policy Communication
• Equal Employment Opportunity Policy
• Anti-Harassment Policy
• Formal Complaint Procedure
- Multiple Avenues to report
- Prompt and thorough investigations
- Corrective action where necessary
• Non-Retaliation Policy
• Documented training and reinforcement
Business Conduct
and Ethics
Legal Requirements
• Federal Acquisition
Regulations (FAR)
• FAR 3.10
• FAR 52.203-13
• FAR 52.203-14
• Similar to:
• Sarbanes-Oxley Act
Section 406
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5. 7/28/2011
FAR Requirements
• Applies to contracts greater than $5 million and with
a performance period of more than 120 days
• Government Contractors must:
• Have formal business code of conduct and ethics
guidelines
• Represent an ongoing effort to promote compliance and
ensure employees understand the code
• Institute and maintain internal controls
Ethical Problem Areas
• Time Charging
• Business Acquisition
• Gratuities
• Conflicts of Interest
Non-Compliance
Companies that do not comply with ethical conduct
guidelines may be subjected to:
• Suspension of current contracts
• Loss of future contract opportunities
• Financial penalties and fines
• Company and individual
• Debarment
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6. 7/28/2011
Executive Order 11246
& Affirmative Action
Affirmative Action
Requirements
• Office of Federal Contract
Compliance Programs (OFCCP)
• Executive Order 11246
• Rehabilitation Act of 1973
• Vietnam-Era Veterans
Readjustment Act of 1974
Affirmative Action
Requirements
• Prohibits illegal discrimination
• Requires affirmative action to ensure
equal opportunities
– Recruitment
– Hires and Promotions
– Benefits and Compensation
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7. 7/28/2011
Affirmative Action
Requirements
• EEO – 1 Reporting
• 50 Employees and $50K in Govt. contracts
• Veterans 100 & 100A Reporting
• $25K in contracts entered prior to 12/1/03
• $100K in contracts entered after 12/1/03
• Written Affirmative Action Plan
• 50 Employees and $50K in Govt. Contracts
AAP for Women
and Minorities
• Annual Snapshot of Company
• Workforce Analysis
– Job Groups
– Females and Minority
• Availability Analysis
– Compare with external census data
– Weight in terms of internal promotions
– Establish goals if underrepresented
Compliance
• OFCCP Governs and conducts audits
• Penalties include:
• Suspension of current contracts
• Loss of future contract opportunities
• Financial penalties and fines
• Restitution to employees
• Debarment
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8. 7/28/2011
Fair Labor Standards Act
Nonexempt and Exempt
• Nonexempt employees are covered by
FLSA’s minimum wage and overtime
provisions.
• Exempt employees are not covered by
the overtime provisions of FLSA.
• Exemptions are based duties and salary.
Executive Exemption
• Salary of at least $455 per week
• Job duties
• Direct work of others
• Authority to hire and fire
• Primary duty is Management of Department or subdivision
• Customarily and regularly directs work of two or more other
employees
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9. 7/28/2011
Administrative Exemption
• Salary of at least $455 per
week
• Exercise of discretion and
independent judgment to
matters of significance
• Non-manual work related to
management or business
operations
Professional Exemption
• Salary of at least $455 per week
• Learned and creative professionals
• Primary duty requires advanced knowledge that is
intellectual in character and includes the consistent
exercise of discretion and judgment
• Advanced knowledge in a field of learning or
science
Computer Exemption
• Salary or hourly rate of
at least $27.63 per
hour
• Computer systems
analyst, programmer,
engineer or other
similar field
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10. 7/28/2011
Avoid Deductions
from Pay
• Maintain their salary basis and do not
deduct for:
• Absences due to illness or disability
• Absences for personal reasons
• Disciplinary suspensions and penalties
• Unpaid leave
• Can make the employee utilize leave
FLSA Penalties
• Back wages
• Fines of $1,000 - $10,000 for each
willful violation.
• Class Action – Go back 5 years
I-9 Worker Eligibility
• I-9 Worker Eligibility
• Completed within 3 days.
• Federal contractors and subcontractors are required to use E-Verify as
of September 8, 2009. Executive Order 12989 mandates the electronic
verification of all employees working on any federal contract
• Must be done accurately
• Companies will get unannounced audits. All employees hired within last
three years all terminated employees within last year.
• Penalties range from $1,000 - $10,000 for each wrongful act. Civil
penalties and criminal penalties, including incarceration for up to six (6)
months for willful violation acts.
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11. 7/28/2011
Drug Free Workplace Act
• Drug Free Workplace Act of 1988
• Contractors with contracts over $100,000 must comply with the Drug Free
Workplace Act
• Establish a continuing, drug-free awareness
program:
• to inform employees of the dangers of drug abuse; the company's drug-
free workplace policy; the penalties for drug abuse violations occurring in
the workplace; the availability of any drug counseling, rehabilitation, and/or
employee assistance plans offered through the employer.
Drug Free Workplace Act
• Requires each employee directly involved in the work of the contract or grant
to notify the employer of any criminal drug statute conviction for a violation
occurring in the workplace not less than five (5) calendar days after such
conviction.
• Notify the Federal agency with which the employer has the contract or grant
of any such conviction within ten (10) days after being notified by an
employee or any other person with knowledge of a
• Penalties:
• Payments for contract or grant activities may be suspended.
• Contract or grant may be suspended or terminated.
• Contractor or grantee may be prohibited from receiving, or participating in, any future
contracts or grants awarded by any Federal agency for a specified period, not to
exceed five years.
RISK MANAGEMENT
An Overview of Government Contractors’ Liability Exposures
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12. 7/28/2011
Core Contract Requirements
• General Liability
- Standard limits are $1,000,000 per occurrence; $2,000,000 aggregate
- Client listed as an Additional Insured/Waiver of Subrogation
• Hired & Non Owned Auto Liability
- Standard limit is $1,000,000
• Employer’s Liability
- Majority of contracts require $1,000,000 per employee; $1,000,000 per
disease; $1,000,000 policy limit
• Umbrella
- Requirements from $1,000,000 to $5,000,000 + in limit
Recommended Coverage's
• Employment Practices Liability
- Standard limit is $1,000,000 - $2,000,000
• Professional Liability (Errors & Omissions)
- Standard limit is $1,000,000
• Directors and Officers
- Standard limit is $1,000,000
Employment Practices (EPL)
Protects the company against lawsuits arising
from employment related incidents.
Examples:
• Sexual Harassment
• Wrongful Termination/Wrongful Discipline
• Discrimination
• Retaliation
• Employment related defamation or invasion of privacy
• Negative Evaluation
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13. 7/28/2011
Top 5 Reasons for EPL
1. EPL covers both actual and alleged acts of discrimination, harassment, retaliation,
wrongful termination and other similar acts.
2. 1 in 4 privately held companies has been sued by a current or former employee in recent
years.
3. Over 40% of EPL claims are against firms with fewer than 100 employees. Federal &
State employment laws apply to all employers - any size company has an exposure!
4. The Equal Employment Opportunity Commission (EEOC) recorded over 100,000 charges
in 2010 and obtained more than $400 million in settlements for claimants. That's an
increase of more than 10,000 charges compared to 2009!
5. The financial ramifications of not having EPL insurance can be crippling, especially for
small firms because they do not have the operating budgets to handle the defense costs,
let alone settlements and judgments, of an uninsured claim.
Professional Liability
(Errors & Omissions)
Professional Liability protects your company
from claims arising from errors or omissions
in your product or service.
Examples:
• Programming errors
• Software performance
• Breach of written contract
• Intellectual property infringement
• Negligent consulting advice
Professional Liability
(Errors & Omissions)
Common misperception:
Government Contractors aren’t at risk for a professional liability claim
There is no clause in a government contract that states that the
prime contractor or government is excluded from negligence.
Certain contract are now requiring E&O insurance coverage.
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14. 7/28/2011
Directors & Officers (D&O)
Protects Directors & Officers of a company against
lawsuits alleging wrongful acts while acting in their
capacity as such for an organization.
Examples:
• Mismanagement
• Errors in Judgment
• Breach of Fiduciary Duty/Obligation
• Breach of Duties under applicable statutes/laws
• Misstatements or Omissions regarding future performance to
investors/clients
Directors & Officers (D&O)
Who can sue?
- Competitors
- Customers
- Suppliers
- Government
- Shareholders
**Directors & Officers can be held personally
liable for their decision making!!**
Defense Base Act
Federal Law (Defense Base Act, 42 U.S.C. §§ 1651
54 and the Longshore and Harbor Workers’
Compensation Act 33 U.S.C §§ 901-50)
Requires government contractors to secure separate workers
compensation coverage for their employees overseas.
The Defense Base Act provides medical, disability and death
benefits to covered employees injured or killed in the course of
employment.
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15. 7/28/2011
Defense Base Act
The Defense Base Act covers the following employment activities:
• Working for private employers on U.S. military bases or on any lands used by the
U.S. for military purposes outside of the United States, including those in U.S.
Territories and possessions;
• Working on public work contracts with any U.S. government agency, including
construction and service contracts in connection with national defense or with war
activities outside the United States;
• Working on contracts approved and funded by the U.S. under the Foreign
Assistance Act, generally providing for cash sale of military equipment, materials,
and services to its allies, if the contract is performed outside of the United States;
• Working for American employers providing welfare or similar services outside of
the United States for the benefit of the Armed Forces, e.g. the USO.
Source: Department of Labor
Defense Base Act
•Responsibility
• The Prime Contractor is responsible for ensuring that the subcontractor has
required DBA insurance.
• If the subcontractor fails to secure DBA coverage, the prime contractor will be
liable for and be required to secure the payment of such benefits.
• If any employer fails to secure DBA they can face fines and imprisonment.
• If the employer is a corporation and fails to secure DBA, the president,
secretary and treasurer shall be severally and personally liable, jointly with the
corporation, for any compensation or other benefits payable under the Act for
injury or death which may occur to any of its employees.
Source: Department of Labor
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