Remedying DBA Violations with Withholding and Debarment
Understanding the process of withholding contract funds to address DBA/DBRA/CWHSSA violations pending resolution of wage disputes, ensuring payment of back wages to covered workers, and implementing effective enforcement strategies. Explore sample letters for withholding requests and verification. Learn about the regulatory framework for withholding funds under Davis-Bacon and CWHSSA contract clauses.
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Remedying DBA Violations Withholding & Debarment
DBA/DBRA/CWHSSA Withholding & Disposition of Withheld Contract Funds WITHHOLDING OF CONTRACT FUNDS PRIORITY OF WITHHELD FUNDS DISPOSITION OF WITHHELD FUNDS SAMPLE LETTERS: WITHHOLDING REQUEST & WITHHOLDING VERIFICATION
Withholding of Contract Funds DBA and CWHSSA provide for withholding of contract funds to satisfy alleged wage underpayments pending resolution of a wage dispute. 40 U.S.C. 3142(c)(3); 40 U.S.C. 3702(d). Withholding of contract funds is an effective enforcement tool in DBA/DBRA/CWHSSA cases. It protects the rights of covered workers to wages due them.
Withholding of Contract Funds Both Davis-Bacon and CWHSSA contract clauses provide for withholding to ensure the availability of contract funds needed for the payment of: unpaid back wages found to be due to covered workers; and CWHSSA liquidated damages. DOL regulations address withholding in the Davis-Bacon and CWHSSA contract clauses at 29 C.F.R. 5.5(a)(2) and 5.5(b)(3). (See FAR at 48 C.F.R. 52.222-7 and 52.222-4(c).)
Withholding of Contract Funds DBA & DBRA ( 5.5(a)(2) & FAR 48 C.F.R. 5.222-7) The contract clause language set forth at 29 C.F.R. 5.5(a)(2), (reflected at FAR 48 C.F.R. 5.222-7), states that: The federal agency or the loan or grant recipient shall, upon its own action or upon written request of an authorized representative of DOL, withhold or cause to be withheld from the contractor under this contract or any other federal contract with the same prime contractor, or any other federally-assisted contract subject to Davis-Bacon prevailing wage requirements, which is held by the same prime contractor, so much of the accrued payments or advances as may be considered necessary to pay the full amount of wages required by the contract.
Withholding of Contract Funds CWHSSA 29 C.F.R. 5.5(b)(3) The contract clause set forth at 29 C.F.R. 5.5(b)(3) requires: The Federal agency (or the loan or grant recipient), upon its own action or upon written request of an authorized representative of DOL, to withhold or cause to be withheld from any monies payable on account of work performed by the contractor or subcontractor under any contract subject to CWHSSA or any other Federal contract with the same prime contractor, or any other federally- assisted contract subject to the CWHSSA held by the same prime contractor, such sums as may be determined to be necessary to satisfy any liabilities of such contractor or subcontractor for unpaid wages and liquidated damages under CWHSSA. (See also FAR 48 C.F.R. 5.222-4(c).)
Withholding of Contract Funds DBA/DBRA/CWHSSA Withholding from another federal contract with the same prime contractor is called cross- withholding. The contracting agency may withhold funds: on its own initiative; or at the direction of DOL.
Withholding of Contract Funds FAR (48 C.F.R. Part 22) FAR guidance in 48 C.F.R. Part 22 instructs that if the contracting officer believes a violation exists, or upon request of the Department of Labor: the contracting officer must withhold from payments due the contractor an amount equal to the estimated wage underpayment and estimated liquidated damages due under the CWHSSA. 48 C.F.R. 22.406-9(a).
Withholding of Contract Funds FAR (48 C.F.R. Part 22, cont d.) If subsequent investigation confirms violations, the contracting officer must adjust the withholding as necessary. If DOL requested the withholding, the contracting officer must not reduce or release the withheld funds without written approval by DOL. The withheld funds are to be used to satisfy: assessed liquidated damages; and unless the contractor makes restitution, validated wage underpayments.
Priority of Withheld Funds DOL s position is that accrued funds withheld for payment of wages may not be used or set aside for other purposes until such time as the prevailing wage issues are resolved. To give contracting agency reprocurement claims priority, for example, would essentially make the laborers and mechanics unfairly pay for the breach of contract between their employer and a federal agency or grant recipient.
Priority of Withheld Funds It is DOL s position that wages due underpaid employees have priority over any competing claims against a contractor, regardless of when the claims were raised. DOL believes that to hold otherwise would be inequitable and contrary to public policy since the affected employees have already performed the work subject to a contractual obligation to fulfill the labor standards requirements.
Priority of Withheld Funds It is also DOL s position that employees wage claims for underpayment have priority over: (1) An Internal Revenue Service levy for unpaid taxes; (2) Reprocurement costs of the contracting agency after a contractor s default or termination for cause; (3) Any assignee of the contractor including assignments made under the Assignment of Claims Act; and (4) Any claim by a trustee in bankruptcy.
Disposition of Withheld Funds WHD Regional Offices (RO s) are responsible for directing the processing of back wage disbursements. The WHD RO will request the contracting agency to transfer the withheld funds: When a contractor agrees to distribution of contract funds to the covered workers (whether or not they have been subject to a formal withholding process); or
Disposition of Withheld Funds (cont d.) When a contractor (the prime contractor or subcontractor) does not timely request a hearing pursuant to 29 C.F.R. 5.11(b); or Following the issuance of ALJ decisions, including decisions approving settlement agreements; or Following issuance of ARB decisions; or Subsequent to final resolution of further litigation.
Disposition of Withheld Funds DBA(Federal Agency Contracts) On November 21, 2013, President Obama signed into law Public Law No. 113-50, the Streamlining Claims for Federal Contractor Employees Act. This law has transferred the authority to pay wages found due laborers and mechanics and withheld under direct DBA contracts from the Comptroller General to the Secretary of Labor. Thus, the disbursement of back wages due laborers and mechanics on contracts subject to the DBA itself, previously handled by the Comptroller General s Claims Office, is now a DOL/WHD responsibility.
Disposition of Withheld Funds DBA, DBRA & CWHSSA Therefore, DOL/WHD now handles the disbursement process for back wages due under the DBA contracts as well as DBRA contracts (receiving federal assistance by grants, loans, or loan guarantees rather than direct federal contracts). DOL also handles CWHSSA disbursements. (Note: DOL also handles SCA disbursements.)
AAM Guidance Referral to WHD Refusal-to-Pay & Debarment Cases AAM No. 215, dated March 7, 2014 provides contracting agencies with guidance regarding: Referral of refusal-to-pay and debarment cases to the WHD regional offices; and Procedures for contracting agencies to use in sending withheld funds due covered laborers and mechanics to WHD for disbursement.
Disposition of Withheld Funds WHD Disbursement The WHD regional offices are responsible for directing the disbursement process for funds withheld from covered contracts for back wages. When appropriate, WHD will send a written request to the contracting agency to transfer withheld funds to WHD for disbursement.
Disposition of Withheld Funds WHD Disbursement (cont d) In refusal-to-pay cases, WHD has case file information identifying workers who may be due back wage disbursements and the amounts due upon case resolution.
Disposition of Withheld Funds WHD Disbursement (cont d) In cases other than the refusal-to-pay cases, e.g.: Contractor authorizes agency to forward contract funds to cover back wages found due; or Agency forwards funds it has collected as a result of agency enforcement of DBA, DBRA and/or CWHSSA requirements. If the agency has not sent the case file to WHD, it should provide the appropriate WHD RO with the names, current addresses, social security numbers (if available), and back wage amounts due each worker when it forwards the funds to WHD.
Disposition of Withheld Funds Sending Funds to WHD for Disbursement The withheld monies are disbursed by two methods: wire deposits & paper checks. Incoming wire deposits will be processed by the Federal Reserve Bank of New York City (TREAS NYC) and must include the following information:
Disposition of Withheld Funds Wire Deposits Bank Name: ABA Routing Number: Agency Location Code: BETC (collections): TAS: Case ID Number: Case Name: If there is no WHD Case ID: Submitting Agency Agency contact & phone COLL TREAS NYC 021030004 16010002 16X6507 WHD WHISARD case ID number (if available) Employer/Company name _____________________ _____________________
Disposition of Withheld Funds Paper Check Deposits On the check or a separate letter transmitting the check, include the name of the contractor found in violation and the contract number(s) for the contract(s) on which the work was performed. Before contracting agencies forward checks to WHD, they should contact the WHD regional government contracts enforcement coordinator for additional guidance. Regional coordinators are identified at: http://www.dol.gov/whd/govcontracts/regions.htm
Sample Letters Withholding Request & Verification Two sample letters are available in the section of the DOL Prevailing Wage Resource Book entitled DBA/DBRA/CWHSSA Withholding and Disbursement WITHHOLDING REQUEST LETTER USED BY WHD (DBA/DBRA/CWHSSA) VERIFICATION OF WITHHOLDING LETTER THAT AGENCIES MAY USE to provide WHD confirmation that the funds have been withheld.
Withholding - Hearing Process (29 CFR Parts 6 and 7) Refusal to pay cases are resolved pursuant to 29 CFR 5.11. If factual issues are in dispute, WHD notifies the contractor of findings and offers an opportunity to request a hearing before an Administrative Law Judge (ALJ). If only questions of law are in dispute, WHD issues a ruling letter that may be appealed to DOL s Administrative Review Board (ARB).
Administrative Review Board Members appointed by the Secretary of Labor. Hears appeals of ALJ decisions. Acts on petitions to review final rulings of WHD Administrator on coverage interpretations, and WD matters. Appeals may be in the form of an oral hearing in Washington, D.C., but typically are by review of the record in closed session.
Debarment Occurs when a contractor is declared ineligible for future contracts due to: Violations of the DBA in disregard of its obligations to employees or subcontractors. Aggravated or willful violations under the labor standards provisions of related Acts. Period of ineligibility is 3 years for DBA and up to 3 years for DBRA.
Debarment Criteria Debarment is considered when a contractor has: Submitted falsified certified payrolls; Required kickbacks of wages or back wages; Committed repeat violations; Committed serious violations; Misclassified covered workers in clear disregard of proper classification norms; and/or As a prime contractor, failed to ensure compliance by subcontractors.
Debarment Criteria Impact on Prime Contractor Prime contractors can be debarred for subcontractor violations. A July 26, 2012 WHD press release in a major case involving a prime contractor s enhanced compliance measures under a settlement agreement and debarment of multiple subcontractors is instructive in this regard.
Debarment Process The debarment process is given at 29 CFR 5.12(b) Where the Administrator finds reasonable cause for debarment, a registered or certified notification shall be sent to the last known address of the contractor and any responsible officers. Notified parties may make a written request for a hearing postmarked within 30 days of the date of the letter from the Administrator. The issue will then be referred to an Administrative Law Judge for hearing.
Debarment List The name(s) of the contractor and any responsible parties, along with the name of any firms in which they are known to have an interest, are placed on the list of ineligible persons or firms, which is distributed to federal agencies. This list is searchable online at the System Awards Management website
Removal from the Debarment List Any person or firm debarred due to aggravated or willful violations under DBRA may make a written request for removal from the debarment list not sooner than six months after the date their name was published on the list. The Administrator will determine whether the contractor has demonstrated a current responsibility to comply with the labor standards of the related acts.
Removal from the Debarment List Factors considered by the Administrator in determining whether removal from the debarment list is warranted include the severity of the violations, the contractor s attitude towards compliance, and the contractor s past compliance history. In no instance will a party be removed from the debarment list until a further investigation has been conducted to determine whether the contractor is currently in compliance with not only the labor standards set forth in the related acts, but also other applicable labor statutes providing wage protections. Removal will not be considered where the contractor has not made full restitution of any unpaid wages.
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