Labor Laws and Federal Contracting Intersect: How Universal Health Systems Could Subject Federal Contractors to False Claims Act Liability

The Supreme Court has made federal contracting more treacherous by extending the reach of False Claims Act (“FCA”) liability.  While the decision related to FCA liability for misrepresentations related to staffing levels, the case may provide a roadmap for federal officials looking to trigger FCA claims against contractors who are noncompliant with federal labor laws enforced by the Department of Labor.  Specifically, those at risk of debarment or cancellation of contracts due to noncompliance with Executive Order 11246 or the proposed Fair Pay and Safe Workplaces Executive Order may be at risk of more serious penalties.

On June 16, 2016, the Supreme Court issued its decision in Universal Health Services v. United States ex rel. Escobar, 579 U.S. ___ (2016).  At issue, was the reach of the implied false certification theory of liability under the FCA. Under the implied false certification theory, a defendant can be held liable for a false claim if he submits a claim while knowingly being noncompliant with a regulatory, statutory, or contractual requirement to receive government payment. However, in order to be actionable, the violation must be material to the government’s payment decision. The Court indicated that the materiality standard is “demanding,” and a misrepresentation or a minor violation would not suffice. However, the decision goes beyond the notion that the false claim must be a misrepresentation related to the work performed or improper billing.

The Court’s ruling has implications in the labor and employment context for federal contractors seeking to comply with Executive Orders 11246 (Equal Employment Opportunity) and 13673 (Fair Pay and Safe Workplaces). Federal contractors can face a wide variety of sanctions for noncompliance with either executive order, the most severe of which is debarment. The Office of Federal Contract Compliance Programs (“OFCCP”) considers violations and the appropriate sanctions on a fact-specific, case-by-case basis. There are a number of alternate, less severe sanctions that the OFCCP will consider before debarment, such as withholding payments or canceling a single contract. See e.g., OFCCP v. Disposable Safety Wear, 92-OFC-11 (Sept. 29, 1992) (considering alternate sanctions before ordering debarment).

Although federal contractors do not make claims in the traditional sense, there are a number of ways the FCA could be implicated. For example, a federal contractor could knowingly fail to disclose labor law violations in violation of the Fair Pay and Safe Workplaces executive order, and apply for government funding. A contractor could seek reinstatement after losing funding or being debarred without redressing the violations associated with the sanction. Less severe sanctions and their corresponding violations therefore pose an interesting challenge for defendant corporations who may be noncompliant with either of the executive orders and therefore potentially liable under the FCA and Universal Health Services’ implied certification liability. Due to the severity of debarment, a violation rising to that level could suffice as material. However, with the possibility of reinstatement, it is still unclear whether that can be said with certainty. Although the Court sought to clarify the materiality standard, the language is still ambiguous enough to invite litigation especially with middle ground sanctions like withholding payment or selective contract cancellation. It remains to be seen how courts will apply the Universal Health Services materiality test in the employment context, and it is another reason to be concerned about recent enforcement acts of the agency.

Brexit: What Does it Mean for Employers in the U.K.?

We set out below our best guess on where this leaves employees, management and HR in the UK.

Firstly as we have all heard repeatedly today, nothing is going to change immediately and that is the same for employment law.  It will be years before any changes are made and for the time being, everything remains the same and critically, no one has to leave.

Much of our employment law is just that – employment law driven solely by the UK.  We then have laws that have been enacted into UK law as a result of European directives – so those laws are the ones that may, at some point in the future, be targeted.  Our guess at Orrick is that changes where they happen will be focused on consultation rights, holiday pay and working time.  Worker involvement has never had the same traction in the UK that it has with our European counterparts and the UK has always viewed employee consultation with a degree of skepticism.  For this reason, we think it may eventually be a focus for change.

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It’s Contagious: Paid Sick Leave and Minimum Wage Hikes Spread to Los Angeles and San Diego

Paid sick leave is on the rise, as we reported here, here, here, and here.  As we approach the one-year compliance anniversary for state-mandated paid sick leave, employers now face additional compliance wrinkles in the Los Angeles and San Diego markets.  Earlier this month, both Los Angeles and San Diego passed paid sick leave and minimum wage ordinances that take effect (and require compliance) as soon July 2016.

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It’s All a Matter of Degree – Fourth Circuit Upholds Four-Year Front Pay Award and Tuition Reimbursement in SOX Case

*This post was drafted with contribution from Ashley Gambone, law clerk.

Affirming a SOX victory for an employee, the Fourth Circuit in a 2-1 decision in Gunther v. Deltek upheld a Department of Labor award of four-years of front pay to a former financial analyst of a software firm and also affirmed an award of tuition reimbursement for a four-year, full time, college degree program.  The Fourth Circuit’s Gunther decision discusses the standards for proving or disproving a causal connection in SOX cases, for meeting the after-acquired evidence standard to cut off damages, and for proving entitlement to front pay and other damages under SOX.

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OFCCP’s New Sex Discrimination Regulations Bring Few New Requirements But Highlight Need for Contractors to Revisit Policies and Practices

On June 14, 2016, the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) unveiled its final sex discrimination guidelines governing covered federal contractors.  The OFCCP proposed changes to the rule on January 30, 2015 and the official comment period closed on April 14, 2015, following a two-week extension so that it could take comment on the Supreme Court’s pregnancy discrimination decision in Young v. United Parcel Serv., Inc.  The final rules come six months after the expected date on the fall regulatory agency but were released to coincide with the White House Council on Women and Girls first “United State of Women” summit, which was also held on Tuesday. Our coverage of that event can be found here

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Who Can Sue Under the Fair Credit Reporting Act? A Claimant Must Now Have a Concrete Injury to Go to Court

shutterstock_270813506On May 16, 2016, the U.S. Supreme Court issued an opinion in the closely watched case Spokeo, Inc. v. Thomas Robins et al., addressing the issue of standing under the Fair Credit Reporting Act (FCRA). The Court held that in order to establish standing to sue, plaintiffs must show “an invasion of a legally protected interest” that is both “particularized and concrete.” In doing so, the Court vacated the Ninth Circuit’s prior holding that a consumer has standing under Article III to bring an action for statutory violations without alleging actual injury. See Spokeo Inc. v. Thomas Robins et al., case number 13-1339.

Spokeo operates a “people search engine” that provides information on contact data, marital status, age, occupation, and wealth level. In June 2013, the Federal Trade Commission (FTC) fined Spokeo for selling consumer profiles to potential employers without fulfilling its reporting obligations under the FCRA. The FTC’s pursuit of Spokeo, a non-traditional consumer reporting agency (CRA), signaled a more expansive application of FCRA provisions at that time, and set the groundwork for a civil action on related claims.

Thomas Robins subsequently brought action against Spokeo, alleging “willful violations” of the FCRA, which he claimed resulted in publication of inaccurate information about his job and wealth level that caused him psychological harm while struggling to find work. The district court dismissed the case, finding that Robins had failed to plead an injury-in-fact that could be traced to Spokeo. In February 2014, the Ninth Circuit reversed, holding that a showing of actual harm is not required for willful FCRA violations and that the suit could go forward under Article III without alleging actual injury.

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Digging Into the New Overtime Regulations

shutterstock_127335995 (002)In 2015, the Department of Labor (“DOL”) proposed substantial changes to the minimum salary level requirements, sought input on whether bonuses and incentives should be included in meeting the salary level test and considered changing the duties test to establish overtime eligibility. Taken together, these proposed changes would have had a drastic effect on the obligation of employers to pay overtime. On May 18, 2016, DOL issued its Final Rules and employers have until December 1, 2016 to comply. Overall, the changes strike a middle ground as DOL declined to adopt the more restrictive California 50% duties test. However, doubling the salary level threshold and other changes present significant economic and compliance challenges for employers. Below is a summary of key takeaways and steps employers should consider to address these changes and ensure compliance.

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Despite Veteran-Friendly Construction, Liability Under USERRA’s Anti-Discrimination Provisions Still Requires Adverse Employment Action

The Uniformed Services Employment and Reemployment Rights Act of 1994 (“USERRA”), 38 U.S.C. §§ 4301–4335, prohibits discrimination against employees and potential employees based on their military service and imposes certain obligations on employers with respect to employees returning to work after a period of service in the U.S. military.  With a large number of service members currently deployed and increased intervention against ISIS potentially enlarging these numbers, employers’ treatment of employees who are members of the military continues to remain an important issue.

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Not So Fast: Administrative Review Board Vacates Discrimination Finding Sought by OFCCP

A recent decision from the Department of Labor’s Administrative Review Board serves as a warning to federal agencies against overreaching in their efforts to identify alleged employment discrimination.  It also serves to highlight the heavy burden that plaintiffs—whether government agencies or private litigants—must carry in cases alleging a pattern or practice of disparate treatment.

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Orrick Provides Testimony at EEOC hearing on Promoting Diverse and Inclusive Workplaces in the Tech Sector

On May 18, 2016 the EEOC held a commission meeting to address the topic of promoting diverse and inclusive workplaces in the tech sector. Orrick’s Erin Connell was asked to testify at the meeting and provide examples of the types of diversity initiatives tech companies are using. Watch our blog for updates on workplace diversity and new developments in the equal pay space as they continue to unfold. Included below is the text of Erin’s testimony before the EEOC:

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