Jay Blindauer
On June 16, 2021, Congress completed passage of Senate Bill No. 475, the Juneteenth National Independence Day Act, which makes June 19th (“Juneteenth”) the 11th Annual Federal Holiday (excluding Inauguration Day, which is quadrennial and geographically limited). President Biden signed the bill into law the next day, June 17th.[1] Forty-eight states and D.C. already observe Juneteenth as a holiday or other day of commemoration. The 5 U.S.C. § 6103(a) list of Federal Holidays now reads as follows.
“New Year’s Day, January 1.
Birthday of Martin Luther King, Jr., the third Monday in January.
Washington’s Birthday, the third Monday in February.
Memorial Day, the last Monday in May.
Juneteenth National Independence Day, June 19.
Independence Day, July 4.
Labor Day, the first Monday in September.
Columbus Day, the second Monday in October.
Veterans Day, November 11.
Thanksgiving Day, the fourth Thursday in November.
Christmas Day, December 25.”[2]
Since Congress has not created a new Federal Holiday since 1983, Federal contractors and subcontractors may be out-of-practice as to what a new Federal Holiday means for fringe benefits to employees, and for contract compliance.
The first thing to note is that the statutory list of Federal Holidays only automatically provides paid holidays to Government employees. For a Federal Holiday to apply to a contractor or subcontractor, it must be introduced through further action (such as through a contract clause or applicable wage determination). As part of this, the Fair Labor Standards Act of 1938 (“FLSA”), which is arguably the most fundamental Federal wage law and applies more broadly than just Government contracts, imposes no requirement on an employer to provide paid time off.[3] Further, the FAR does not have a rule that generally imposes on contractors/subcontractors a requirement to provide paid time off. Rather, FAR cost principles state that “[e]xcept as provided otherwise in [FAR] subpart 31.2, the costs of fringe benefits are allowable to the extent that they are reasonable and are required by law, employer-employee agreement, or an established policy of the contractor.”[4] Furthermore, the U.S. Department of Labor (“DoL”) states that paid time off is “generally a matter of agreement between an employer and an employee (or the employee’s representative).”[5]
SCA
That said, the Service Contract Labor Standards statute (formerly known as the Service Contract Act, hereafter “SCA”), where applicable, requires a contractor/subcontractor to provide to non-exempt employees no less than the local prevailing wages and fringe benefits (including holidays).[6] The local prevailing wages and benefits are established by a U.S. Department of Labor (“DoL”) wage determination, or a collective bargaining agreement (“CBA”).[7] Accordingly, DoL’s regulations state the following.
“Most fringe benefit determinations list a specific number of named holidays for which payment is required. Unless specified otherwise in an applicable determination, an employee who performs any work during the workweek in which a named holiday occurs is entitled to the holiday benefit[.]”[8]
Consequently, providing a paid holiday for Juneteenth will only be SCA-required after wage determinations are updated to include Juneteenth as a named holiday.
DBA
Turning to the Wage Rate Requirements (Construction) statute (formerly known as the Davis-Bacon Act, hereafter “DBA”), where applicable, a contractor/subcontractor is required to provide to laborers and mechanics no less than the local prevailing wages and fringe benefits (including holiday pay).[9] Like the SCA, DBA prevailing wages and benefits are established by a DoL wage determination which lists the holidays.[10] Hence, just like with the SCA, Juneteenth must be a named holiday in the relevant wage determination to be DBA-required.
PCA
The Walsh-Healey Public Contracts Act (“PCA”), where applicable, establishes minimum wages, maximum hours, and safety/health standards under a supply contract.[11] However, the PCA does not set forth requirements for fringe benefits, including holidays.[12]
So, that is the general legal context if a contractor/subcontractor is thinking about giving, or already gave, employees a paid holiday for observing Juneteenth.
What Does the Contract Say?
Legal backdrop aside, the specific circumstances matter. Particularly, what does the contract say? If the contract follows the Uniform Contract Format, the first place to look is Section F (Deliveries or performance), Section G (Contract administration data), or Section H (Special contract requirements).[13] Many contracts list in one of those sections the holidays that a contractor must observe. And there may be language which states that a contractor must follow all Federal Holidays, or all holidays designated by Federal law, Executive Order, or Presidential Proclamation. In which case, not only does that provide a mandate for a contractor/subcontractor to give employees paid time off, moreover, contract type permitting, the cost should be chargeable to the contract.
The contract may also include a FAR Supplement Clause that lists holidays, and/or provides pertinent language. These FAR Supplement Clauses include, but are not limited to, the following.
- NASA Federal Acquisition Regulation Supplement (“NFS”) Clause 1852.242-72 (Denied Access to NASA Facilities)
- HUD Acquisition Regulation (“HUDAR”) Clause 2452.237-77 (Temporary closure of HUD facilities)
- Department of State Acquisition Regulation (“DOSAR”) Clause 652.237-72 (Observance of Legal Holidays and Administrative Leave)
- Department of Education Acquisition Regulation (“EDAR”) Clause 3452.237-71 (Observance of administrative closures)
- Environmental Protection Agency Acquisition Regulation (“EPAAR”) Clause 1552.215-72(b)(2)(x), Alt. I (Instructions for the Preparation of Proposals) (“The amount of indirect time (paid absences) identified in the proposal must be consistent with company policy and must allow for the ten Federal government holidays.”)
Therefore, the contract may have a lot to say about what paid holidays a contractor/subcontractor should be providing to its employees. And that language may already pre-contemplate observing a new Federal Holiday like Juneteenth.
Impact on Performance Obligations and Billing
While giving employees paid time off to observe a Federal Holiday like Juneteenth is a good thing to do, a contractor/subcontractor should be mindful of any impact on contract performance obligations, or billing to the Government.
For example, if the contract terms require the contractor/subcontractor to achieve a certain number of productive labor hours (such as for a level-of-effort term contract), the introduction of a new paid holiday may incur a productive labor hour loss that has to be made up on a different week, and consequently could also trigger unanticipated overtime pay.[14] Overtime often has to be pre-approved by a Contracting Officer, and an upward equitable adjustment certainly must be.
For a service contract, a new paid holiday may, depending on how the contract is written, still be considered a contract absence/vacancy. In which case, some communications with the Contracting Officer and subsequent adjustments may be required.
Another issue to be wary of is uncompensated overtime (“UCOT”) for FLSA-exempt salaried employees.[15] Particularly, consider the scenario where a contractor/subcontractor gives a salaried employee a single-day holiday, and the salaried employee still works over 32 hours for that week. FAR Clause 52.237-10 (Identification of Uncompensated Overtime) provides that “compensated personal absences such as holidays, vacations, and sick leave shall be included in the normal work week for purposes of computing uncompensated overtime hours.”[16], [17] Therefore, with the holiday notionally representing another 8 hours of work, the individual has over 40 work-accountable hours for the week, and with no extra compensation. Hence, the salaried employee incurred UCOT.
Now, where it gets interesting is whether the UCOT causes a Government overpayment. Assume that the contractor/subcontractor pays the salaried employee premised on a 40-hour workweek. With the holiday factored in, the contractor/subcontractor obtained over 40 work-accountable hours from the salaried individual with no additional labor cost. Consequently, the per hour labor cost for the week, which is supposed to be based upon no more than 40 hours, has gone down. Must the per hour cost decrease be passed on to the Government? If the holiday is required by the contract, probably not, because the Government is not shouldering cost for something outside of the contract requirements. However, if the holiday is not required by the contract, the issue may require more examination.
Another issue to consider is whether travel expenses on the day of a Federal Holiday will be reimbursed by the Government. Indeed, Juneteenth became a Federal Holiday only two days before its occurrence. So, unanticipated, some individuals may have been on travel status when the Federal Holiday arrived. Accordingly, the Federal Travel Regulation (“FTR”) states the following.
“In general, you will be reimbursed as long as your travel status requires your stay to include a non-workday, (e.g., if you are on travel through Friday and again starting Monday you will be reimbursed for Saturday and Sunday), however, your agency should determine the most cost effective situation (i.e., remaining in a travel status and paying per diem or actual expenses or permitting your return to your official station).”[18]
Therefore, per diem and/or actual expenses may be reimbursable, but the issue is one that likely should be brought to the attention of the cognizant agency travel official.
Last, an impromptu paid holiday may also be the impetus of a request for an equitable adjustment (“REA”) to the Contracting Officer merely to make a no-cost schedule adjustment.
In sum, the key takeaway is that it is improvident for a contractor/subcontractor to give employees an extemporized holiday without, at least after the fact, analyzing the impact to performance obligations and/or billing.
Final Thoughts
In light of the new Juneteenth Federal Holiday, the following things may be considered, either for June 19, 2021, or in preparation for next year.
- A contractor may ask the Contracting Officer to request a modified wage determination from DoL that lists Juneteenth on the holiday list. Alternatively, a contractor may directly request the DoL Wage and Hour Division to review and reconsider a wage determination.[19] If an updated wage determination is issued, it is possible, at least in the case of the DBA, for the wage determination to be applied retroactively, and be the basis of an upward equitable adjustment.[20]
- As mentioned at the beginning, FAR 31.205-6 provides that the cost of fringe benefits (including paid holidays) are “allowable to the extent that they are reasonable and are required by law, employer-employee agreement, or an established policy of the contractor.”[21] Therefore, if a contractor/subcontractor already had in place a policy to provide paid time off for all Federal Holidays, and it is the type of contract/subcontract that permits cost submissions, FAR 31.205-6 may provide a way to obtain contract reimbursement for Juneteenth-related costs.
- At least for the SCA, DoL’s regulations state that “[t]he obligation to furnish holiday pay for the named holiday may be discharged if the contractor furnishes another day off with pay in accordance with a plan communicated to the employees involved.”[22] Alternatively, for both the SCA and DBA, the obligation to provide a holiday can be discharged by issuing an equivalent monetary payment.[23] Therefore, if a contractor/subcontractor did not provide a holiday to employees on the Friday before, or Monday after, Juneteenth, there is still a potential method to observe the Federal Holiday.
My thanks to Ambika Biggs, Esq. for the idea to write the Note.
[1] See Juneteenth National Independence Day Act, Pub. Law No. 117-17 (June 17, 2021).
[2] 5 U.S.C. § 6103(a) (after implementation of the new law).
[3] See 29 U.S.C. §§ 201-19.
[4] FAR 31.205-6(m) (Compensation for personal services).
[5] https://www.dol.gov/general/topic/benefits-leave/holiday
[6] See 41 U.S.C. § 6703(1)-(2).
[7] See FAR 22.1002-2 and 22.1002-3.
[8] 29 C.F.R. § 4.174(a)(1).
[9] See 40 U.S.C. §§ 3141(2)(B) and 3142; see also FAR 22.403-1.
[10] FAR 22.404; 29 C.F.R. § 5.29(a).
[11] See 41 U.S.C. §§ 6501-11; see also 41 C.F.R. § 50-201.1.
[12] See 41 U.S.C. § 6502.
[13] See FAR 15.204-1.
[14] See, e.g., FAR 16.207.
[15] See FAR 37.101 (definition of Uncompensated overtime).
[16] FAR Clause 52.237-10(a).
[17] The FAR prescription provision states that “[t]he contracting officer shall insert the provision at 52.237-10, Identification of Uncompensated Overtime, in all solicitations valued above the simplified acquisition threshold, for professional or technical services to be acquired on the basis of the number of hours to be provided.” FAR 37.115-3.
[18] 41 C.F.R. § 301-11.21.
[19] See 29 C.F.R. §§ 1.8, 4.56, and 7.2.
[20] See FAR 22.404-6(b)(5).
[21] FAR 31.205-6(m).
[22] 29 C.F.R. § 4.174(a)(3).
[23] Id. at §§ 4.174, 4.177, and 5.31.