Category Archives: Legal Brief

President Obama signs Executive Order to increase minimum wage for federal contractors and to expand eligibility for overtime pay

By: Joseph L. Hardesty

Stites & Harbison PLLC – Builders Exchange Allied Member

Joseph Hardesty





President Obama has issued two Executive Orders that will have the effect of increasing workers’ wages and which will affect business owners throughout the country. On February 12, 2014, President Obama signed an Executive Order requiring Federal contractors to pay their employees at least $10.10 an hour. Then, on March 13, 2014, President Obama signed an Executive Order directing the Secretary of Labor to review overtime rules in order to expand the number of workers who would be eligible for overtime pay.

The Executive Order regarding minimum wages for employees of Federal contractors, directs the Secretary of Labor to issue new regulations increasing the minimum wage for these workers to $10.10 per hour.

The Executive Order states that the minimum wages will only apply to the following type federal service contracts:

• Procurement contracts for services or construction;
• Contracts or contract-like instruments for services covered by the Service Contract Act;
• Contracts or contract-like instruments for concessions including any concessions contract excluded by Department of Regulations at 29 CFR 4.133(b); and
• Contracts or contract-like instruments entered into with the Federal government in connection with Federal property or lands and related to offering services for federal employees, their dependents, or the general public.

The Executive Order requires the new minimum wage to be paid by “Federal contractors and subcontractors” and states that the obligation to pay the new minimum wage will be imposed by requiring all federal contracts to contain a clause that requires a certification as a condition of payment that workers have been paid the new minimum wage. The contractor will be required to include a similar clause in lower tier subcontracts. These clauses should be developed by the FAR Council within 60 days after the Labor Department issues its regulations. These provisions of the Executive Order suggest that the regulations will apply to contractors and all of the lower tier subcontractors. It is not clear whether the new minimum wage requirement would apply to all employees of federal contractors, or only those employees who perform work on the qualifying government contract but the Executive Order seems to suggest that it would only apply to employees who perform work on the federal contract. This will not be clear until the Department of Labor issues its regulations. The Executive Order does not change the wages required by the Davis-Bacon Act or the Service Contract Act. The Executive Order will not take effect will not take effect until the Labor Secretary issues the new regulations on before October 14, 2014 and will only apply to contracts executed after January 1, 2015.

The Executive Order expanding overtime pay directs the Labor Secretary to revise the federal rules on overtime pay in order to make more workers eligible for overtime pay. The revisions would change the overtime exceptions under the Fair Labor Standards Act to allow more workers to be eligible for overtime pay. Currently, an employee who is paid a salary basis of not less than $455 per week and who performs exempt duties is not eligible for overtime pay. The proposed regulations would likely increase the weekly pay for exempt employees from $455 per week to a higher amount thus making more workers eligible for overtime pay. The new regulations would probably not come issued until the fall of 2014 and would likely not take effect until next year. The last time these rules were changed was in April 2004, under the Bush Administration, when the salary floor for exempt status was raised from $155 per week to $455 per week.

Neither Executive Order has been implemented by Federal regulation. However, employers and those who do business with the Federal government should be aware of these prospective changes for business planning and budgeting.

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Keeping Safety in Focus

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By: Zachary D. Jones

Keeping focused can be difficult. The world seems to be growing ever more complex, and the construction industry is no exception. Where fifty pages of contract documents—including the technical spec’s—might have sufficed a few decades ago, now multiple reams of two-sided, single-spaced contract documents are the rule rather than the exception. Many of the requirements contained in those cumbersome contract documents relate to general conditions. In addition to the contractually required general conditions, contractors are also subject to more regulatory and other legal requirements than ever before. One such requirement that often appears in both the contract and government regulations are safety requirements. In Kentucky, those safety requirements are usually enforced by the Kentucky Labor Cabinet.

For many contractors, general conditions, including safety requirements, represent additional expense that must be endured, even suffered through. For project managers and superintendents, the ability to trim that expense represents easy margin—a way to beat the budget without reducing overtime or cutting into the much loved per diem. In the end, it is easy to view safety programs as merely an added expense and lose sight of why owners, general contractors, construction managers, and lawmakers insist on including voluminous pages of general conditions and regulations.
Safety is not something to be taken lightly. Over the years, safety requirements have grown in importance. On many public projects, for example, contractors must maintain certain safety performance records to even be eligible to bid. And private owners often have similar requirements for not only the general contractor, but all subcontractors on the project too. Thus, maintaining a good safety record can lead to more opportunity.

Having a good safety record starts with having a good safety program. Periodic training, coupled with weekly or even daily safety talks with crews, is an essential component of a good safety program. Depending on the size of the business, hiring a full time safety professional may be a necessary component as well. To that end, many contracts require contractors with a certain number of workers on site to assign a full time safety manager to oversee implementation of the applicable safety requirements. Further, a safety program should ensure compliance with all applicable regulations—including maintaining accurate records of training, accidents, near misses, etc. While implementing a comprehensive safety program will cost money, in the end they typically save much more than they cost.

Not having a safety program may actually cost more than having one. A single reportable incident can result in expenses that far outweigh the cost of creating and running a comprehensive, size appropriate safety program. Considering the potential cost of fines, remedial measures, insurance premiums, potential tort liability, and legal costs, safety programs start to look rather cheap—and certainly more predictable. On the other hand, for contractors looking to grow, owners and general contractors are almost universally dictating that contractors have a written, developed safety program in place. Not having such a program may end up shutting a lot of doors.

In the end, safety is not about the dollars and cents. In the Commonwealth, being a construction worker is one of the deadliest jobs. The Kentucky Labor Cabinet has recently released information indicating that of the jobs it examined, construction workers had the highest death rate. Of those deaths, falls represented the most common fatal hazard. What is frustrating, is that falls are also one of the most preventable hazards. This is even more embarrassing considering the minimal cost of job site management enforcing a 100% tie-off policy and buying each worker a harness and lanyard. Safety is not a general condition expense worth trying to cut.

This week safety is in focus in Kentucky. The 30th Annual Governor’s Safety and Health Conference and Expo is at the Galt House in Louisville starting on May 6th and running through the 9th. For contractors who recognize that they may not be up to date on the latest safety tech, current issues, or trends in safety and safety programs, this expo could be a great way to breathe new life into a forgotten or neglected safety program. And for contractors who simply have failed to ever develop a safety program this expo is a great place to start. Information about the expo can be found at



Recent Opinion Affirms Contractor Reliance on Owner Provided Geotechnical Information

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by: Zachary D. Jones


In Metcalf Construction Company v. United States, the United States Court of Appeals for the Federal Circuit added further support for contractors’ reliance on owner provided geotechnical data. 2014 U.S. App. LEXIS 2515, 2014 WL 519596 (Fed. Cir. Feb. 11, 2014). The decision dealt, in part, with the federal government’s standard differing site conditions clause, 40 CFR 52.236-2; however, the decision may have some impact beyond federal contracts since many other standard contracts employ similar language.

Metcalf Construction Company was the successful bidder on a contract to design and build 188 housing units at Marine Corp Base Hawaii. The Government provided Metcalf and the other bidders with “preliminary” soils information as part of the request for proposals. The bidders, however, were instructed to conduct their own independent investigation of the site. One wise bidder submitted a pre-bid question asking: “This requires an independent investigation after award. . . . Should we infer from this that any unforeseen soil conditions or variances from the Government’s soils report will be dealt with by change order?” The Government responded: “Yes, if there’s a major disparity from the Government’s soil reconnaissance report.”

Metcalf encountered soils significantly different than the government’s soil report indicated shortly after beginning construction on the project. Specifically, the soils were more expansive and susceptible to swelling than indicated in the Government’s preliminary report. In fact, Metcalf’s geotechnical engineer concluded that the building’s foundation would fail under the actual soil conditions unless additional measures were implemented. Accordingly, Metcalf submitted a request to the Contracting Officer seeking compensation for the additional work required to address the actual soil conditions; work that would not have been required if the soils were as the Government’s “preliminary” report indicated. The Contracting Officer denied Metcalf’s request and Metcalf was forced to file suit in the United States Court of Federal Claims under the Tucker Act, 28 U.S.C. §1491(a)(1), and the Contract Disputes Act, 41 U.S.C. §§601-13.

Metcalf lost at trial. The trial court read the contract requirement that Metcalf conduct its own independent investigation as, effectively, placing the risk of unforeseen site conditions on Metcalf. It also found that the pre-bid question and answer—where the Government acknowledged differing site conditions would entitle the contractor to a change order—was nullified after the contract was executed because of Metcalf’s obligation to investigate the site. Metcalf did not accept the trial court’s decision and, instead, appealed to the United States Court of Appeals for the Federal Circuit.

The appellate Court recognized the correct allocation of risks in the contract. The Court reminded the Government of prior decisions noting that the Differing Site Conditions clause exists to take the gamble out of bidding on projects when subsurface conditions are not fully known. It acknowledged that absent some contractual provision allowing contractors to receive an equitable adjustment when differing soil conditions are encountered, contractors would be forced to include large contingencies in their bids—contingencies that may not be needed and that would result in potential windfalls for contractors at the expense of the Government. Further, the Court pointed out the commonsense notion that there is something fundamentally distasteful about the government providing information to bidders, only to then tell the bidder they can’t rely on that information.

The Metcalf decision does not necessarily establish new law regarding the Differing Site Condition clause. Several prior decisions establish the general disfavor of geotechnical disclaimers. Despite this, many recent decisions tend to focus on contractors’ obligations to conduct reasonable site investigations. Some decisions even hold that an owner’s disclaimer of geotechnical data is enforceable notwithstanding that the contract contains a Differing Site Condition clause. To that end, Metcalf is important because it reinforces that, at least on federal contracts which incorporate 40 CFR 52.236-2, contractors may rely on geotechnical data provided by the government, even in the face of a disclaimer.

Of course, the Metcalf decision has its limits. In Metcalf the disclaimer was a little ambiguous. It stated that the “soil reconnaissance report [was] for preliminary information only.” Contractors should still be concerned if they encounter disclaimers that are less ambiguous. Further, Metcalf was a federal contract subject to standard clauses found in the Federal Acquisition Regulations. Contracts with other states, municipalities, or private owners may be subject to different interpretations under legal principles that do not apply to federal government contracts.

The cliché “The best offense is a good defense” certainly applies to contractors who are likely to face differing site condition claims. Contractors should develop a checklist before bidding on any project. That checklist should inquire whether the request for proposal or invitation to bid, specifications, and contract contain the following:

• Geotechnical/soils data
• A geotechnical/soils data disclaimer
• A Differing Site Condition clause
• Any reason to suspect adverse subsurface conditions
• The opportunity for a reasonable pre-bid site investigation

Thinking about these things before bidding on a project, like the wise bidder in Metcalf, may go a long way to ensuring you are not left holding more risk than you bargained for if adverse subsurface conditions are encountered after you get the job.

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Attention Kentucky Employers: OSHA Has Launched a New Initiative Aimed at Temporary Workers

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By:  Joseph L. Hardesty & Zachary D. Jones

Kentucky is one of twenty-two states that have adopted a “State OSHA Program.”  That does not, however, mean that federal Occupational Safety and Health Administration, aka “OSHA,” regulations do not apply to employers in the Commonwealth.  To the contrary, State OSHA Programs, like that operated by Kentucky, are required by law to ensure their “job safety and health standards are ‘at least as effective as’ comparable federal standards.”  Therefore, employers in Kentucky need to pay close attention to OSHA regulations, training, and enforcement initiatives.  To that end, employers in Kentucky should be aware that OSHA has undertaken a new initiative.

OSHA’s new initiative is aimed at protecting temporary workers. Last April, OSHA issued a memorandum to its regional administrators asking them to focus on the safety of temporary workers. The memorandum was prompted by a series of reports of temporary workers suffering serious injuries during the first days on a jobsite. The OSHA initiative is intended to ensure that temporary employees are protected from workplace hazards and are provided appropriate training in a language that they understand. OSHA’s rationale for the initiative is that temporary workers are at greater risk of workplace injuries and illnesses because they often occupy the most hazardous jobs on the worksite, they often lack proper training and they tend to be less proficient at speaking English.

OSHA identifies temporary workers as those who are working under a host employer / staffing agency employment structure where the temporary worker is supplied to a host employer and paid by a staffing agency. As a result of this initiative, OSHA inspectors will be determining whether an employer hires temporary workers and whether those workers receive required training in a language and vocabulary they understand.

An example of OSHA’s enforcement of workplace rules for temporary workers is with its recent citation of Henkel Corporation. On September 10, 2013, OSHA cited Henkel for $200,825 for multiple serious and willful violations following the death of a 26-year-old temporary worker who became entangled with the rotating shaft of an industrial mixer. One of the serious violations issued against Henkel was for its alleged failure to ensure that the sleeves on employee coveralls fit tightly so clothing would not get caught in machinery. This is an example of OSHA citing employers for injuries or death to temporary workers provided by a staffing agency.

Employers who use temporary employees should be aware that, regardless of the terms of its contract with the temporary placement agency, OSHA will consider the host employer to be responsible for ensuring that its temporary employees have been properly trained and are aware of safety and health hazards on the construction site. Also, OSHA will likely require the host employer to provide health and safety training to all employees, no matter whether they are from a temporary employment agency or not. OSHA requires that the training be provided in the language and vocabulary the temporary worker can understand.

Therefore, the host employer should: 1) ensure that either it or the temporary staffing company provides adequate safety training to the temporary employee; 2) translate its written training materials so that they are in the temporary employee’s native language; 3) enforce the safety rules with temporary employees in the same manner they are enforced with regular employees; and 4) maintain injury and illness records required by OSHA for the temporary employees.

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