If you have ever questioned why there are so many regulations pertaining to certification as a minority, woman and/or veteran owned small business or why the applications are so extensive and complicated, here is your answer.  Per a June 3rd press release from the U.S. Attorney’s Office for the Western District of Missouri, Topeka, Kansas based contractor, Matthew C. McPherson, has pled guilty to defrauding the federal government by bidding on and accepting payment for construction contracts set aside for small businesses and service-disabled veterans and minorities.

McPherson and his co-conspirators were accused of setting up what is referred to as a Rent-A-Vet, Rent-A-Minority or Small Business fraud scheme in order to abuse federal programs promulgated under the Veteran Entrepreneurship and Small Business Development Act of 1999 (the “SDVOSB” program) and Section 8(a) of the Small Business Act (the “8(a)” program) intended to provide opportunities to service-disabled veterans and certified minorities in federal government contracting.

Per the complaint, between September 2009 to March 2018, McPherson and his co-conspirators set up two separate construction companies, which they fraudulently represented to the federal government were owned and controlled by individuals who met the qualifications of the SDVOSB and/or 8(a) programs. These strawman owners, however, did not control the day-to-day operations or the long-term decision making of the companies. Rather, McPherson and his co-conspirators actually controlled and operated the companies and received most of the profits earned by the respective business entities.

Through this scheme, McPherson and his co-conspirators received a total of $346 million of contract proceeds through more than 200 federal set-aside construction contracts that were earmarked for service-disabled veterans and certified minorities. McPherson, who is neither a service-disabled veteran nor certified minority, was not entitled to compete for any of those contracts.

Under the governing federal sentencing statue, McPherson is subject to a sentence of up to five years in federal prison without parole and will have to forfeit more than $5.5 million in fraud proceeds. Thus, this contractor will be spending the next several years in prison because he let greed get the better of him.

What you should take away from this sad situation is that government entities are monitoring and policing these type of state and federal programs. Do not think that you are going to be able to wrongfully take advantage of these programs without consequences. Further, the statutory frameworks for minority, woman and/or service-veteran owned small business certification on the state or federal level are complex. Thus, it is in your best interest to consult an attorney familiar with these requirements while completing your applications to avoid violations.

Last week, the Ohio House of Representatives passed the proposed workers’ compensation budget for the next two years, but not before a controversial amendment was added at the last minute. The budget bill, or House Bill 80, was amended to require injured workers to identify themselves as either a U.S. citizen, non-citizen authorized worker, or an illegal or unauthorized alien when filing a workers’ compensation claim in Ohio. While the amendment does not go so far as to expressly prohibit illegal aliens from receiving workers’ compensation benefits, it does state that claimants who provide false information, including regarding their citizenship status, will be ineligible to receive such benefits and may be prosecuted for workers’ compensation fraud under Ohio law.

Support for the amendment is premised on the State’s interest in knowing who is using workers’ compensation benefits and how many undocumented illegal aliens are working here.  Proponents believe the collected data will be useful in making future law and policy decisions going forward.

Critics of the amendment, however, worry that its obvious chilling effect in discouraging injury claims from undocumented immigrants will result in other problematic and unintended consequences for Ohio citizens. Critics argue that the amendment actually creates incentive for employers to hire undocumented workers, as those workers will be less likely to file claims for any injuries at work out of fear of getting deported. Some opponents of the amendment have also taken that argument a step further, adding that it then allows employers who actually seek out undocumented workers to save money by cutting corners on safety measures. Another common concern for critics is the potential for undocumented injured workers to seek out medical treatment in emergency rooms without either health insurance or, due to this amendment, workers’ compensation coverage, resulting in unpaid medical bills and costs getting passed along to Ohio taxpayers and people with health insurance.

The amendment passed by a vote of 58 to 36 and the bill itself then passed by a vote of 56 to 38. The bill has now been introduced to the Ohio Senate, where it will go through a similar process as it did in the House of Representatives. The bill must be signed by June 30, 2019 in order to take effect for the new fiscal year.

On May 30, 2019, the Office of Labor-Management Standards (“OLMS”) within the U.S. Department of Labor issued a notice seeking comments on a proposed rule that would require labor organizations to submit annual financial reports for trusts in which the labor organization has an interest.

The OLMS oversees the financial disclosure statements required of labor organizations and employers under the Labor-Management Reporting and Disclosure Act (“LMRDA”), as well as investigates alleged wrongdoing.  As described in the recent notice, the purpose of the various reports required of labor unions is to, “empower labor organization members by providing them the means to maintain democratic control over their labor organizations and ensure a proper accounting of labor organization funds… By reviewing a labor organization’s financial reports, a member may ascertain the labor organization’s priorities and whether they are in accord with the member’s own priorities and those of fellow members.”

The proposed new rule is designed to provide union members and others with information relating to trust funds that unions have historically used for a variety of purposes, such as to fund apprenticeship programs, credit unions, strike funds, redevelopment or investment groups, training funds, building funds and educational funds.  The OLMS noted in its May 30 notice that, “While these trust funds can serve valid purposes, they can also be used to circumvent the reporting requirements for labor organizations.”

Accordingly, the proposed rule would establish a “Form T-1”, which a labor organization would have to complete if a majority of the trust’s governing board were selected or appointed by the labor organization, or if the labor organization contributed more than 50% of the trust’s funds.  Information required by the T-1 includes loans made to officers or employees, details about disbursements, and the identification of people receiving more than $10,000 from the trust.

A similar rule was previously proposed on two prior occasions, and each time the rule was challenged by the AFL-CIO.  In the first instance, which occurred in 2005 during the administration of President George W. Bush, the D.C court of appeals found the rule overly broad, and a year later the same court vacated a revised rule on the basis that it had not been published and the public had not been given an opportunity to submit comments to the proposed rule.  It remains to be seen whether the AFL-CIO will challenge this newly proposed rule.

The public has until July 29, 2019 to submit comments to the proposed rule.




Over the past two decades, workplace violence has unfortunately become increasingly prevalent, particularly in the health care and social service industries. As OSHA itself acknowledges, approximately 75 percent of workplace assaults reported annually occur in health care and social service settings and workers in health care settings are four times more likely to be victimized than other workers in private industry.  More recent studies, including one conducted in 2016 by the Government Accountability Office, have found the rate of violence against health care workers is up to 12 times higher than those of the overall workforce.

Although OSHA has been more aggressive of late in its pursuit of employers who have experienced workplace violence incidents, the Department of Labor has not used its rulemaking authority to issue specific standards or regulations on workplace violence.  Recent citations, including the serious violation at issue in Secretary of Labor v. Integra Health Management, Inc., No. 13-1124 (OSHRC March 4, 2019), have instead relied on OSHA’s gap-filling provision, the General Duty Clause, which states that “[e]ach employer . . . shall furnish to each of his employees employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm to his employees.” 29 U.S.C. § 654(a)(1).  Although the Department of Labor announced two and a half years ago, in January 2017, that it would begin the rulemaking process on a workplace violence prevention standard, it has yet to take any steps to do so.

The March 2019 decision by the Occupational Safety and Health Review Commission (“OSHRC”), affirming a serious citation to an employer who had failed to prevent an incident of workplace violence that led to the death of one of its employees, is, therefore, significant.  At issue in Integra Health was whether the employer violated the General Duty Clause by failing to adequately address a workplace violence hazard (i.e., the risk of its employee being physically assaulted by a client with a history of mental illness and violent criminal behavior).  Integra Health provided in-home health care and social services to patients in Florida.  One of its employees was a 25-year old recent college graduate who was hired as a service coordinator, but lacked any experience in social work.  During her face-to-face meetings with one of her male clients, the employee made progress notes documenting that the client made her uncomfortable and anxious.  Integra Health was unsuccessful in contesting the citation, which was affirmed by the Administrative Law Judge, who found that the employer’s workplace violence policy was inadequate, the employee training was insufficient, the employer failed to monitor the employee’s specific progress notes, and the employer failed to take any action to respond to her concerns about their interactions. The employer also failed to inform its employee of the client’s medical background or criminal record for battery, aggravated battery with a deadly weapon, or aggravated assault with a weapon. On her final visit to the client’s home, the client stabbed the employee to death. The OSHRC Commissioners unanimously affirmed the citation. The deadline for review by the Court of Appeals has not yet passed.

The Integra Health decision came just weeks after Rep. Joe Courtney (D-CT) reintroduced a bill that would require the DOL to issue a standard requiring employers in the health care and social services industries to develop and implement workplace violence prevention plans to protect nurses, physicians, social workers, emergency responders and other caregivers. House Resolution 1309 would force OSHA to impose significant requirements on employers, including, designation of an individual responsible for implementing the plan, the performance of risk assessments and identification of potential workplace violence hazards, development and implementation of incident reporting and post-incident investigation procedures, employee training, and annual evaluations of the same.  The Bill seems to reflect Congress’ frustration with the DOL and appears to be aimed at accelerating the DOL’s often frustratingly slow rulemaking process. Momentum for the legislation continues to build – the bill currently has 139 co-sponsors.  Meanwhile, industry groups are developing their own guidance and best practices for their members. Employers are advised to keep current on these industry initiatives. They should then develop and review their policies to ensure that workplace violence threats specific to their industry and their own workplace are being adequately addressed and train managers and employees accordingly.

Reposted from a Litigation client alert.

A recent $44 million jury verdict in state court in Chicago serves as a stark warning to companies who hire employees that might bring trade secrets from their former employers to their new position. The lesson: take concrete steps to ensure a new employee doesn’t share or use those trade secrets, or risk being held accountable for the employee’s actions. Quite often, the new employer with a deep pocket – not the employee – becomes the target of the lawsuit, and bears the brunt of any damages.

The case, SS&C Technologies v. Bradley Rossa, involved competitors in the financial software industry. Rossa left SS&C Technologies and brought with him to his new employer, Clearwater Analytics, a host of documents SS&C claimed were confidential, including client lists, sales reports, marketing materials, proposals and client contract information.  He allegedly shared the information and used it in the course of his employment, prompting SS&C to sue not only Rossa for his breach, but also Clearwater for misappropriating the trade secrets. According to media reports, the jury only awarded $1 in damages against Rossa, but awarded $16 million in compensatory damages and another $28 million in punitive damages against Clearwater for its theft and use of the trade secrets.

The verdict, though subject to appeal, demonstrates the importance of taking affirmative steps to ensure that new employees do not bring with them, use or share any confidential information or trade secrets obtained from a former employer. It is essential that a company make clear – both in initial interviews and in the hiring and onboarding process, and preferably in writing – that it does not need or want a former employer’s information, and that the sharing or use of that information is grounds for termination.  It is prudent to obtain affirmative representations from the new employee that he or she is not bringing any such information with her and will not use such information. Monitoring the employee’s activities may be appropriate as well. Such steps will help shield the company from liability if a new employee decides to misuse confidential information.

This week, the United States Supreme Court agreed to consider whether Title VII of the Civil Rights Act of 1964 prohibits workplace discrimination on the basis of gay and transgender status.

The Court will consider this issue in the context of three cases: Two involve claims that employees were fired because of their sexual orientation. In the third case, the plaintiff claims she was fired because she was transgender and preparing to live openly as a woman.  The Court will hear the cases during the nine-month term that begins this October.

Whether anti-discrimination protections do (or should) extend to LGBTQ status is an issue that has divided the country and the Courts for decades. Some federal appeals courts have ruled that sexual-orientation and transgender discrimination constitute forms of discrimination on the basis of “sex,” which  Title VII currently prohibits, because they are a form of “sex stereotyping.” The sex-stereotyping theory was first approved by the Supreme Court in 1989 in Price Waterhouse v. Hopkins, the story of which became the subject of the recent movie, “On the Basis of Sex.” In Hopkins, the Court ruled that employers violate Title VII when they treat women negatively based on normative conventions about how they “should” look and act.  For example, Hopkins was allegedly told she needed to walk more femininely, talk more femininely, dress more femininely, wear make-up, have her hair styled, and wear jewelry,  and she was allegedly denied a promotion because she did not do so.

Some Courts have since interpreted Hopkins as also prohibiting sexual orientation and transgender discrimination, reasoning that these distinctions similarly implicate stereotypes about how men and women should look and whom they should be attracted to. Other courts have simply ruled that these are separate classes that Title VII did not include and did not intend to include; therefore, additional protections must come from Congressional legislation.

This issue will almost certainly divide the Supreme Court, and the outcome could turn on Justice Brett Kavanaugh’s recent confirmation.  Justice Kavanaugh replaced retired Justice Anthony Kennedy, a conservative who usually supported gay rights and authored significant Court opinions on such issues, including the Court’s 2015 decision legalizing gay marriage and its 2003 opinion invalidating laws that criminalize gay sex. In contrast, Kavanaugh’s approach to gay rights is largely unknown, as he was not involved in any major related cases as an appeals court judge.

The Supreme Court’s decision may have important implications for employers. If the Court sides with the employees, the decision could create nationwide workplace protections for gay, transgender, and other members of the LGBTQ community.  Meanwhile, and even if the Court ultimately denies these protections under Title VII, employers  should remember that about half of all states have implemented their own laws that provide certain workplace LGBTQ protections. Moreover, even in states that have not enacted such laws, like Ohio, many cities (including Cleveland, Columbus, and Dayton) and counties within those states have enacted similar laws. Therefore, employers should ensure they are aware of these laws and how they apply to each location in which they operate. Employers should also review their  anti-discrimination training materials and policies and ensure that they are consistent with applicable laws.

Recent reports of campaigns designed to discourage potential employers from hiring Trump Administration officials raise the question of whether a private sector employer would have any jeopardy for going along with such a boycott. The answer depends upon where the act takes place. Fifteen states,[1] plus Puerto Rico and the District of Columbia, prohibit discrimination or retaliation against employees or applicants on the basis of political affiliation or activity. Some states have more limited, but potentially applicable laws. (For a thorough analysis of these laws see Volokh). Other states may recognize doctrines, such as violation of public policy or engaging in lawful activities, that could be fashioned into a reasonable argument for employee protection.

Political parties are not mentioned in the Constitution of the United States. What is mentioned is “…the right of the people to peacefully assemble, and to petition the Government for a redress of grievances.” (Amendment I) In addition to freedom of speech, this provides some protection from governmental interference with the right of persons to join and support political parties. Indeed, the current suits against alleged gerrymandering to favor one party over another, use this type of argument to create a constitutional violation out of interfering with an institution unmentioned in the document.

The so-called right of free association has been recognized as covered by the First Amendment protections, thereby giving additional heft to arguments that political party participation should enjoy some special protection, at least from government interference. Thus, local governments cannot officially prefer members of one party over another, or retaliate against employees for their participation in political campaigns, subject to certain limitations. Private employers, except in the locations where there are statutes, have not had to worry about this category of discrimination. It would not be surprising, however, to see a disappointed applicant or discharged employee make an argument that the presence of these rights in the First Amendment (and in many state constitutions) establishes a clear public policy to protect political activity, including service to the nation by joining whatever administration is currently in power. On the other hand, employers also enjoy the right to associate with whom they choose, and could argue that forcing a rock-ribbed conservative to hire a socialist activist would violate the rights of the employer. Or forcing a liberal think tank to hire a Trump administration true believer would be inconsistent with the free association model.

Given that many former administration officials seek post-government work in the District of Columbia, in New York City, at Yale, or at think tanks in coastal states, they are likely to find themselves with at least theoretical protection against political discrimination. Employers who accede to the suggestions to boycott administration officials may find themselves subject to discrimination claims, with uncertain results.

[1] Arizona, California, Colorado, Connecticut, Louisiana, Minnesota, Missouri, Nebraska, Nevada, New Mexico, New York, South Carolina, Utah, West Virginia, Washington.

Last month we discussed a developing story regarding employer requirements to provide pay data on EEO-1 reports – more formerly known as Component 2. As we discussed, on March 4, 2019, The U.S. District Court for the District of Columbia ordered the immediate reinstatement of the EEOC’s pay data collection provisions (requiring covered employers to report pay information by race, ethnicity, and gender) in their EEO-1 report. The Office of Management and Budget (OMB) had suspended those Obama era provisions in 2017.

Shortly after our post, the Court held a status conference inquiring as to how the EEOC and the OMB planned to comply with its order. The EEOC stated that as a result of the Court’s reinstatement of the revised EEO-1 Component 2 collection, the EEOC would need until September 30, 2019 in order to account for significant practical challenges associated with complying with the Court’s order – it would also need to approach a third party vendor in order to handle the mass amount of data. The commission relied upon the EEOC Acting Chair’s administrative powers under Title VII as its authority to adjust the Component 2 pay data collection deadline to September 30, 2019.

Based on the recent filings, it is clear the EEOC is not equipped to begin pay data collection for Component 2 by May 31, 2019. Simply put, the Commission intends to delay pay data collection until September 30, 2019 – at the earliest. What this means for the immediate future of Component 2 is entirely unclear. It remains possible that the Court’s original March 4, 2019 ruling reinstating the pay data collection may be appealed – while it is also not entirely clear how the Court will respond to the EEOC’s most recent explanation.

With all of this in mind, employers should submit the Component 1 EEO-1 report data as required by May 31, 2019.  As of today, unfortunately, it is not clear when Component 2 pay data will need to be submitted.  Employers should be prepared to submit such data at a later date. We will continue to monitor this developing situation.

On April 1, the U.S. Department of Labor proposed a new regulation for determining a company’s joint employer status under the Fair Labor Standards Act. When two companies are deemed joint employers, they share responsibility for the workers’ wages, which include the payment of minimum wages and overtime. Under the new rule, the Labor Department would analyze the following four factors in evaluating whether a company jointly employs workers:

  • Whether the company hires or fires the employees
  • Whether the company supervises and controls the employees’ work schedule or conditions of employment
  • Whether the company determines the employees’ rate and method of pay; and
  • Whether the company maintains the employees’ employment records.

The Labor Department proposed the new rule to determine, as a matter of economic realty, whether a company actually exercises sufficient control over an employee to qualify as a joint employer. In the Labor Department’s estimation, a business model (e.g., franchise or staffing) does not alone indicate joint employer status under the FLSA. Rather, the company must exercise sufficient control over the employee.

If implemented, this new regulation will limit companies’ shared wage and hour liability and follows the trend established by other agencies within the Trump administration. As we previously reported, in September 2018 the National Labor Relations Board proposed to limit the circumstances under which a company would be considered a joint employer under the National Labor Relations Act.

For now, the waiting game begins. Before the rule can go into effect, the Labor Department must publish it in the Federal Register for public comment. As we have done consistently, Frantz Ward attorneys will monitor developments on this proposed rule and other joint employer liability developments.

Earlier today, the U.S. Department of Labor (“DOL”) announced a proposed rule to update regular rate calculations under the Fair Labor Standards Act (“FLSA”). Under the FLSA, employers must pay overtime pay to employees who work more than 40 hours in a week. The overtime pay rate is one and a half times an employee’s “regular rate” of pay. However, as many employers know, calculating an employee’s regular rate is not as straightforward as it may seem.

The DOL has not implemented any significant changes to the regulations regarding regular rate of pay in several decades. Accordingly, the proposed rule will update the regulations to clarify whether common benefits offered in the modern workplace must be included in an employee’s regular rate of pay.

In an effort to encourage employers to provide more benefits to their employees, the proposed rule excludes the following from an employee’s regular rate:

  • The cost of providing onsite specialist treatments from chiropractors, personal trainers, counselors, etc.
  • The cost of providing gym access, gym memberships, and fitness classes
  • The cost of providing wellness programs, such as health promotions and disease prevention activities
  • Employee discounts on retail goods and services;
  • Payments for unused paid leave, regardless of the type of leave
  • Reimbursed travel or other expenses, even if not incurred “solely” for the employer’s benefit
  • Reimbursed travel expenses that do not exceed the amounts set forth in the Federal Travel Regulation
  • Certain types of bonuses, broadening the current meaning of “discretionary bonus”
  • Certain types of benefit plans, such as accident, unemployment, and legal services; and
  • Certain types of tuition programs, such as course discounts, tuition-reimbursement programs, and programs for repayment of educational debt.

The proposed rule also includes changes to the existing “call-back” pay and “basic rate” regulations.

Frantz Ward attorneys will monitor developments on the proposed rule throughout the comment period.