Federal Contracting: Assessments and Citations of Federal Labor Law Violations by Selected Federal Contractors
Released: 2010-10-01T00:00:00

Letter

Background

The Department of Labor and the National Labor Relations Board (NLRB) are responsible for enforcing many of the country’s most comprehensive federal labor laws ranging from occupational health and safety to minimum wage, overtime pay, and the rights of employees to bargain collectively with their employers.

Most private sector firms—regardless of whether they are federal contractors—must comply with safety and health standards issued under the Occupational Safety and Health Act. The act was meant “to assure safe and healthful working conditions for working men and women.” The Secretary of Labor established OSHA in 1970 to carry out a number of responsibilities under the act, including developing and enforcing safety and health standards, educating workers and employers about workplace hazards, and establishing responsibilities and rights for both employers and employees for the achievement of better safety and health conditions.

OSHA is authorized to conduct workplace inspections to determine whether employers are complying with safety and health standards, and to issue citations and assess penalties when an employer is not in compliance. OSHA characterizes violations as serious, willful, repeat, and other-than-serious, with civil penalties in specified amounts for these various types of violations. Table 1 describes the different violations and their associated penalties.

WHD works to enhance the welfare and protect the rights of the nation’s workers through enforcement of the federal minimum wage, overtime pay, record keeping, and child labor requirements of the Fair Labor Standards Act; the Family and Medical Leave Act; and employment standards and worker protections provided in certain other laws. Additionally, WHD administers and enforces the prevailing wage requirements of the Davis- Bacon Act (DBA), the Service Contract Act (SCA), and other statutes applicable to federal contracts for construction and for the provision of goods and services.

When WHD finds violations during enforcement actions, it computes and attempts to collect and distribute back wages owed to workers and, where permitted by law, also imposes penalties and other remedies. If employers refuse to pay the back wages and any penalties assessed, WHD officials, with the assistance of attorneys from Labor’s Office of the Solicitor, may pursue the cases in court. When WHD finds violations under the Government Contract statutes, which includes the SCA, DBA, and Contract Work Hours and Safety Standards Act, the agency may pursue administrative action to recover wage and benefit payments and to debar the contractor from future federal contracts. WHD may also request that the federal agency withhold contract payments to protect the back wages and benefits and may request that the federal agency terminate a contract.

The National Labor Relations Act (NLRA) is the primary federal law governing relations between labor unions and employers in the private sector and is administered by the NLRB. Under Section 8 of the act, it is illegal for employers to interfere with workers’ right to organize or bargain collectively or for employers to discriminate in hiring, tenure, or condition of employment in order to discourage membership in any labor organization, and such behavior is defined as an unfair labor practice. After concluding that a violation has been committed, the board typically requires firms to cease and desist the specific conduct for which an unfair labor practice is found. The board may order a variety of remedies, including requiring the firm to reinstate unlawfully fired workers or restore wages and benefits to the bargaining unit. In some cases, the board will also issue a broad cease and desist order prohibiting the firm from engaging in a range of unlawful conduct. If an employer to whom the federal government owes money (such as a federal contractor) has failed to comply with an order by the board to restore wages or benefits, the government has the option of withholding from any amount owed to that employer (including payments under a federal contract) any equal or lesser amount that the contractor owes under the board order.

By statute, federal agencies are required to award contracts only to “responsible” sources. This statutory requirement has been implemented in the Federal Acquisition Regulation (FAR). The FAR establishes “a satisfactory record of integrity and business ethics” as one of the general standards a prospective contractor must meet to be responsible. Also, contracting officers are required to query the excluded parties list system (EPLS) to determine whether the prospective contractor has been debarred or suspended from federal contracts.

Federal Government Awards Contracts to Companies with Wage Assessments and Health and Safety Citations

The federal government has awarded contracts to companies that had been cited for large back-wage liabilities by Labor. Restricting our analysis to the 50 largest WHD assessments from fiscal year 2005 through fiscal year 2009, we found that over 60 percent of these assessments were made against companies that subsequently received contracts in fiscal year 2009. Specifically, we found that 25 out of the 50 largest WHD assessments were charged to 20 federal contractors. WHD assessed these 20 federal contractors for over $80 million in back wages. According to FPDS-NG, the federal government awarded over $9 billion in federal contract obligations to these 20 contractors during fiscal year 2009. None of the 20 federal contractors had been debarred or suspended from federal contracts. Further, we do not know the extent, if any, that contracting officers considered WHD assessments in the awarding of the federal contracts.

The federal government has also awarded contracts to companies that Labor has assessed large fines against for violating health and safety regulations. From our analysis of the 50 largest OSHA fines for health and safety violations for closed investigations from fiscal year 2005 through fiscal year 2009, we found that almost 40 percent of these fines were made against companies that subsequently received federal contracts in fiscal year 2009. Specifically, we found that 8 of the 50 largest OSHA fines were made against 7 other federal contractors for safety violations. Further, these 7 companies accounted for about $3.7 million in OSHA fines. According to FPDS-NG, the federal government obligated approximately $180 million in federal contracts to these contractors during fiscal year 2009. None of the 7 federal contractors had been debarred or suspended from federal contracts. Further, we do not know the extent, if any, that contracting officers considered OSHA fines in the awarding of the federal contracts.

Currently, the inspection databases maintained by OSHA, WHD, and NLRB do not contain DUNS numbers for all their cases. The OSHA and WHD data primarily identify companies by their names and, for WHD, employer identification numbers, when they were available. These firms may incur violation citations under multiple names due to the existence of multiple subsidiaries and corporate mergers. As such, the full extent of the federal government’s contracts awarded to companies with wage, health and safety, and collective bargaining violations is unknown.

Examples of Federal Contractors That Were Cited for Violating Federal Labor Laws

Each of the 15 companies we reviewed were cited for failing to follow wage, health and safety, or collective bargaining laws enforced by WHD, OSHA, and NLRB, respectively. Seven of these companies also had other types of violations, such as hiring undocumented workers, violating environmental standards, fraudulently billing Medicare and Medicaid, and billing for services not rendered. Most of these 15 federal contractors had contracts with the Department of Defense (DOD), the largest contracting agency. Other federal agencies that contracted with these companies include the Departments of Agriculture, Homeland Security, and Justice; General Services Administration (GSA); and National Aeronautics and Space Administration (NASA). According to FPDS-NG, these 15 companies received over $6 billion in federal contract obligations in fiscal year 2009. See table 2 below for detailed information on our 15 cases.

Agency Comments

We provided a draft of this report to NLRB and Labor. NLRB did not have any comments on the draft report. We received technical comments from Labor, which we incorporated as appropriate.

As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 14 days from the report date. At that time, we will send copies to interested congressional committees, the Secretary of Labor, and the Chairman of the NLRB. The report also will be available at no charge on the GAO Web site at http://www.gao.gov.

If you or your staff members have any questions about this report, please contact me at (202) 512-6722 or kutzg@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report.