Debarment – a bar on a federal contractor from receiving business from the federal government for a period of years – which is usually based on a violation of a public prevailing wage statute (such as the Service Contract Act (SCA)), is the most draconian civil penalty levied against most contractors, particularly those whose core businesses involve servicing the federal government. Historically, there has not been a relationship between debarment and Fair Labor Standards Act (FLSA) compliance, save incorporation into the SCA or the Davis-Bacon Act of various FLSA principles. Now, Congressman Keith Ellison (D-MN) has sought to attach a provision to new federal appropriations bills under which a contractor that has been found liable for even a modest FLSA violation (of as little as $5,000) would be subject to debarment on that basis alone. Recently, the Congressman’s provision was adopted as part of 2015 Appropriations bills for Transportation, Housing and Urban Development, the Department of Defense, Energy and Water Development, Financial Services and General Government, State and Foreign Operations, and Interior and Environment.
“This is a classic example of proposed legislation that improperly invokes wage protections to create an overly draconian penalty system and needlessly hamper businesses,” said Leslie Stout-Tabackman, Washington, D.C.-based Jackson Lewis Shareholder and debarment expert. “Essentially, the mildest of unwitting technical violations of the FLSA and its various byzantine requirements could result in the downfall of a business and significant job losses.”
Compliance with federal and state wage-and-hour laws remains paramount to the successful continued operation of federal contractors and indeed all businesses.