Mistakes are now more expensive
For many government contractors, their biggest fear may be being debarred from seeking government contracts. One common cause of debarment is a contractor’s failure to abide by the myriads of government rules and regulations involved in government contracting. But the government realizes that every contractor may make an occasional mistake or employ a bad-apple employee. So rather than always resorting to debarment, seeking reimbursement, or criminal prosecution, the government may assess a civil penalty.
Unfortunately, making the occasional careless mistake is now going to be more expensive.
Congress commands increases in civil penalties
Responding to directions from Congress, a number of federal agencies involved in government contracting have increased the civil penalties for violating various statutes:
- False Claims Act (FCA)
- Anti-Kickback Act (AKA)
- Program Fraud Civil Remedies Act (PFCRA)
Section 701 of the Bipartisan Budget Act of 2015 (Public Law 114-74) required agencies to adjust penalties to catch up with inflation. With a few exceptions, the increases are calculated by using a statutory formula based on the Consumer Price Index for All Urban Consumers (published by the Bureau of Labor Statistics).
Changes made by the U.S. Department of Justice (DOJ)
DOJ made the following changes:
|Act||Penalty as of 11/2/2015||New Penalty as of 12/1/2016|
|FCA||Minimum = $5,500
Maximum = $11,000
|Minimum = $10,781
Maximum = $21,563
What these laws do
The FCA makes it illegal for a person to submit a false claim for payment to the government. The false claim may be for how much the contractor should be paid, but may also involve issues about the quality or nature of the product or service provided. (The contractor typically has to certify that certain things are true (or false) about the product or service provided to the government.)
The AKA makes it illegal for a person to provide money (or anything else of value) to a prime contractor, prime contractor employee, subcontractor, or subcontractor employee in exchange for favorable treatment with respect to a federal contract.
The PFCRA is sometimes called the Baby False Claims Act. It’s an administrative remedy for false claims—and false statements—that are too small for the federal government to pursue by using the FCA. In addition, it can be used to redress reckless disregard of the truth of claims or statements.
Changes made by the U.S. Department of Labor (DOL)
These changes may involve civil penalties related to pay (Fair Labor Standards Act), safety (Occupational Safety and Health Act), and benefits (Employee Retirement Income Security Act), among many others.
I’ll highlight a couple to show you how things have been affected:
- The Family Medical Leave Act (FMLA) requires that employers post a notice about the FMLA. The old penalty for failure to post is $110; the new penalty is $163 for each offense.
- The Fair Labor Standards Act (FLSA) provides for a civil penalty for failure to pay the minimum wage and for failure to pay overtime. The old penalty was $1,100 per violation; the new penalty is $1,894 per violation.
As a generality, it makes no difference whether an employer is or is not a government contractor. All employers are supposed to follow these laws. However, government contractors may be subject to closer scrutiny because of the enforcement powers of the Office of Federal Contract Compliance Programs (OFCCP).
Changes made by other agencies
A number of other government agencies made changes as well: