Update on VA Contracts and $10.10 Issue with DOL and VA Officials 
Recorded on January 15, 2015 (90 minutes)

On Thursday, January 15, from 2:00 - 3:30 pm EST, you will have the opportunity to get your questions answered relating to the $10.10 wage issue and VA contracts with officials from the U.S. Department of Labor (DOL) and U.S. Department of Veterans Affairs (VA).  As you know from previous correspondences from AHCA, on February 12, 2014, President Obama signed Executive Order 13658, Establishing a Minimum Wage for Contractors . The Executive Order raises the hourly minimum wage paid by contractors to workers performing on covered Federal contracts to: (i) $10.10 per hour, beginning January 1, 2015; and (ii) beginning January 1, 2016, and annually thereafter, an amount determined by the Secretary of DOL in accordance with the Order. On October 1, 2014, DOL published the final rule implementing the provisions of Executive Order 13658.

It is long-standing policy that Medicare (Parts A and B) or Medicaid providers are not considered to be federal contractors. However, if a provider currently has VA patients, they are considered to be a federal contractor.  On Friday, Dec. 19, and as noted in an email AHCA sent out to its members, DOL shared the below information relating to VA contracts and the $10.10 wage increase.  The full DOL Q and A on the President's Executive Order can be found here.  Please be sure to register for this webinar event if you plan to attend.  If you have any questions whatsoever relating to this, feel free to contact AHCA's Senior Director of Not for Profit & Constituent Services, Dana Halvorson.    

Q. Does the Executive Order apply to basic ordering agreements that were in existence prior to January 1, 2015?

No.  Executive Order 13658 applies only to "new contracts" with the Federal Government that result from solicitations issued on or after January 1, 2015, or that are awarded outside the solicitation process on or after January 1, 2015.  A basic ordering agreement (BOA) that is entered into before January 1, 2015 is not subject to the Executive Order.  The Executive Order similarly does not apply to a Federal agency's exercise of a pre-negotiated option period on or after January 1, 2015 pursuant to a BOA that was in existence prior to January 1, 2015.  Service contracts or orders that are entered into on or after January 1, 2015 pursuant to a BOA that was in existence prior to January 1, 2015 are similarly not covered by the Executive Order.  Pursuant to the Department's final rule, service orders that are issued under BOAs entered into prior to January 1, 2015 will thus only be covered by the Order if and when the BOA itself is modified to include the minimum wage requirement. 

For example, on February 5, 2014, a Federal agency entered into a BOA with a medical clinic to provide rehabilitative care to veterans.  The BOA has a contract period of one base year plus four option years.  The BOA is not subject to the minimum wage requirements of the Executive Order during the base year or any of the option years.  Similarly, specific service orders that are entered into pursuant to that BOA will not be covered by the Executive Order until the BOA itself is covered by the Executive Order.

Q. If a contractor enters into a new contract with the Federal Government that is covered by the Executive Order, does that contractor have to payall of its workers the Executive Order minimum wage? 

Legal Requirements:  Contractors need only pay the Executive Order minimum wage to workers performing work "on" or "in connection with" covered contracts whose wages are governed by the DBA, the SCA, or the FLSA.  Moreover, such workers are only entitled to be paid the Executive Order minimum wage for the time that they spend performing work on or in connection with covered contracts.

A worker who performs "on" a covered contract is any worker who directly performs the specific services called for by the contract's terms.  For example, a nurse or nurse's aide at a skilled nursing center who performs the specific medical services for veterans called for by an SCA contract is a worker that performs "on" the SCA contract.  Workers such as the nurse or aide who perform "on" covered contracts are entitled to be paid at least the Executive Order minimum wage for all hours that they spend performing on those contracts, regardless of how much time in a particular workweek they spend performing such work.

A worker who performs "in connection with" a covered contract is any worker who performs work activities that, although are not the specific services called for by the contract's terms, are necessary to the performance of those specific services.  For example, an FLSA-covered worker who washes laundry for all of the patients at the skilled nursing center mentioned above is performing "in connection" with the SCA contract even though her specific services are not called for by the SCA contract itself.  However, an important exclusion may apply to such workers.  If an FLSA-covered worker performs "in connection with" covered contracts for less than 20 percent of his or her hours worked in a given workweek, that worker is not entitled to the EO minimum wage for any hours worked in that workweek.

Example :  On March 15, 2015, a Federal agency enters into an SCA-covered contract with a skilled nursing center to provide lodging and nursing care to veterans.  The nursing center houses and provides services to 100 patients, only 5 of whom are veterans whose services are paid for pursuant to an SCA contract.  The center must pay at least the Executive Order minimum wage to any workers that perform the specific services called for by the SCA contract for the hours that they spend performing such work.  For example, the nurse or aide who directly provides the medical services to the veterans pursuant to the SCA contract is entitled to $10.10 for all the hours that she spends providing those services.

The center also employs a cook to prepare all of the meals that are served to the 100 patients and a janitor to clean all of the patients' rooms.  The cook and the janitor qualify as workers performing "in connection with" the SCA contract because their food preparation and room cleaning services are necessary to the provision of medical care and lodging for the veterans (even though the cook and the janitor do not directly perform the services called for by the SCA contract).  However, because only 5% of the meals that the cook prepares and 5% of the rooms that the janitor cleans are for the veterans covered by an SCA contract, the cook and the janitor are not entitled to the Executive Order minimum wage because they spend less than 20% of their work hours in a given workweek performing "in connection with" the SCA contract.

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