In the latest issue of The Wright Toolbox:
- Government Over-Inspection Could Be A Breach – read now
- DOL Issues New Overtime Rule Effective January 1, 2020 – read now
GOVERNMENT OVER-INSPECTION COULD BE A BREACH
“Persnickety” – “giving too much attention to small details that are not important in a way that annoys other people.” Cambridge Dictionary. Not only can a persnickety person be annoying, it may also result in a breach of contractual duties. In a recent case the Armed Services Board of Contract Appeals denied the government’s motion for summary judgment finding a factual dispute as to whether the government’s alleged over-inspection breached its implied duty of good faith and fair dealing.
Watts Constructors, LLC, ASBCA No. 61518, 19-1 B.C.A. (CCH) 37382 (2019), arose out of a construction contract at Fort Carson in Colorado. In Watts the contractor asserted that the government’s inspectors were overzealous, interfered with work, arbitrarily rejected work, over-inspected and required minute tasks such as scraping glue resin without justification, cleaning out and brushing the interior of electrical boxes, painting wires. It was also alleged that government inspectors were slow, repetitive, covered work that they should not have, and performed multiple inspections.
The Board reaffirmed that every contract has an implied covenant of good faith and fair dealing that imposes a “duty not to interfere with the other party’s performance and not to act so as to destroy the reasonable expectations of the other party regarding the fruits of the contract.” Breach of the covenant of good faith and fair dealing does not require the violation of an express term of the contract, “[b]ut a specific promise must be undermined for the implied duty to be violated.” Improper motive is not an element of such a breach. The duty may be breached even if the actor believes their conduct to be justified.
The Board noted that confusing and vacillating inspections, multiple inspections to differing standards, or arbitrary and capricious inspections leading to additional work not required by the contract, can establish a basis for contractual recovery under a constructive change theory and may constitute a breach of the implied duty of good faith. The Board held that the contractor provided sufficient evidence of interference, over-inspection, slow, redundant, and multiple inspections, to require more factual development to determine the application of the good faith and fair dealing doctrine.
If you are dealing with a persnickety government inspector that is over-inspecting or interfering with performance of the work, you may also have grounds to claim a breach. Our government contracts group is ready to help you.
DOL ISSUES NEW OVERTIME RULE EFFECTIVE JANUARY 1, 2020
By Greg Currey
On September 24, 2019, the Department of Labor announced its final rulemaking officially increasing the minimum salary requirements for exempt employees under the Fair Labor Standards Act. Effective January 1, 2020, exempt employees must be paid a minimum salary of $684 per week (equivalent to $35,568 per year for a full-year worker) in order to be exempt from the overtime requirements of the FLSA, in addition to meeting the duties requirements of the exemptions. This rulemaking also formally rescinds the DOL’s regulations from 2016 which would have increased the minimum salary threshold to $47,476 per year before they were blocked by the Fifth Circuit. According to the DOL’s estimates, the new rulemaking would allow approximately 1.3 million workers to become eligible for overtime unless their salaries are increased.
In addition to raising the standard salary level, the new rulemaking also raises the total annual compensation level for “highly compensated employees (HCEs)” from the currently-enforced level of $100,000 to $107,432 per year. This is approximately $40,000 less than the proposed rulemaking from March, 2019. Highly-compensated employees are subject to a less stringent duties test, which makes the reduction significant. The new rulemaking also follows the 2016 rule in allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level, in recognition of evolving pay practices.
Employers should immediately begin auditing their compensation levels to determine how to adjust to the new salary threshold. Simply raising salaries is not necessarily the only way to react and employers should begin planning for January 1 now. For some employees making just a little less than the new salary requirement, the most effective plan may be to provide salary increases. For other employees, an employer may want to transition them from an exempt status to a non-exempt status and hire more employees to reduce the number of overtime hours that employees are working.
There is no one-size-fits-all strategy but, with the right plan and preparation, this change can be managed effectively. If you have questions about how your organization should prepare for the changes to the salary thresholds, please do not hesitate to contact me or any of the other attorneys in our employment and labor practice.
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