Tag Archives: DoD

DOD Issues Interim Rule with Significant New Protections for Whistleblowers

On September 30, 2013, the Department of Defense (“DoD”) released an Interim Rule that adds robust protections for whistleblower employees of certain federal contractors and subcontractors.  The Interim Rule was passed to implement portions of Section 827 of the National Defense Authorization Act for Fiscal Year 2013 (“NDAA”), which significantly expanded whistleblower protections for employees of DoD contractors and subcontractors.  According to the DoD Inspector General, Section 827 of the NDAA expanded the DoD whistleblower protections for the first time to:

  • Cover employees of subcontractors, not just prime contractor employees;
  • Protect reports of violations of law, rule or regulation (rather than just violations of law) related to a DoD contract or grant;
  • Include reports of abuses of authority that undermine contract performance; and
  • Prohibit reprisals taken at the request of a contracting agency.

Who Is Covered

The Interim Rule will protect all employees of contractors and subcontractors who were awarded contracts or grants with the DoD on or after July 1, 2013.  The Interim Rule, however, does not apply to disclosures by employees of contractors and subcontractors of any element of the intelligence community if the disclosure (1) relates to the intelligence community; or (2) was discovered during contract or subcontract services provided to an element of the intelligence community. 

The intelligence community is broadly defined to include, among others, the Central Intelligence Agency; the National Security Agency; the Defense Intelligence Agency; the National Geospatial-Intelligence Agency; the National Reconnaissance Office; other offices within the DoD for the collection of specialized national intelligence through reconnaissance programs; and the intelligence elements of the Army, the Navy, the Air Force, the Marine Corps, the Coast Guard, the Federal Bureau of Investigation, the Drug Enforcement Administration, and the Department of Energy.

Protected Disclosures

The Interim Rule specifically prohibits DoD contractors and subcontractors from retaliating against employees who disclose what they reasonably believe to be:

  • Gross mismanagement of a DoD contract;
  • Gross waste of DoD funds;
  • An abuse of authority relating to a DoD contract;
  • A substantial and specific danger to public health or safety; or
  • A violation of law, rule or regulation related to a DoD contract (including the competition or negotiation of a DoD contract).

Entities to Whom Disclosures May be Made

The Interim Rule also expands the persons or entities to whom a protected disclosure can be made to include:

  • A Member of Congress or a representative from a committee of Congress;
  • An Inspector General that has oversight or receives funding for a DoD contract;
  • The Government Accountability Office;
  • A DoD employee responsible for contract oversight or management;
  • An authorized official of the Department of Justice or other law enforcement agency;
  • A court or grand jury; or
  • A management official or other employee of the contractor or subcontractor who has the responsibility to investigate, discover, or address the misconduct.

Other Protections

The Interim Rule contains several other protections for employees.  These include:

  • Written Notice of Protections: Contractors and subcontracts must provide a written notice (in the predominate native language of their workforce) informing their employees of their whistleblower rights under the Interim Rule.
  • No Waiver of Protections: Employees cannot waive their whistleblower rights through agreement, policy, or condition of employment, including in a non-disclosure or release agreement.

Statute of Limitations

Whistleblowers seeking to enforce the protections under the Interim Rule will have three years after the date on which the alleged retaliation took place to file their claim.


The Interim Rule requires whistleblowers to first seek relief by filing a complaint with the Inspector General of the DoD.  The DoD Inspector General will have thirty days to review the complaint and determine whether to dismiss it or impose certain remedies against the contractor.  The DoD Inspector General’s remedies for violations of the retaliation provisions in the Interim Rule include issuing an order:

  • Requiring the contractor or subcontractor to undertake affirmative action to abate the retaliation;
  • Reinstating the whistleblower to a position he or she held before the retaliation, including any compensatory damages and employment benefits the whistleblower is entitled to;
  • Requiring the contractor or subcontractor to pay all costs and expenses (including attorneys’ fees and expert witness fees) the whistleblower incurred in connection with bringing his or her complaint.

The DoD Inspector General’s order can be appealed to the United States Court of Appeals for the circuit in which the alleged retaliation occurred.  Appeals must be filed within sixty days of issuance of the order.

Effective Date of Interim Rule

The Interim Rule took effect on the date of its publication in the Federal Register, September 30, 2013.  Interested contractors, however, may still submit comments to the Interim Rule by November 29, 2013.

Implications of Interim Rule

The significant expansion of whistleblower protections under the Interim Rule will likely increase the already escalating number of whistleblower claims.  In fact, the Senate Report that preceded Section 827 of the NDAA indicated that the reason for the whistleblower expansions was that many of the complaints the DoD Inspector General received were outside the scope of DoD’s previous whistleblower provisions.  Given that the Interim Rule expands the scope of whistleblower protections, including to employees of DoD subcontractors, contractors can expect to see an uptick in the number of whistleblower claims.  In addition, plaintiffs’ attorneys are more likely to pursue these cases considering that successful whistleblowers will be able to recover attorneys’ fees and legal costs.

Covered contractors and subcontractors should review their whistleblower policies to make sure they provide adequate complaint and investigation procedures in light of the Interim Rule.  In particular, considering that whistleblower employees of subcontractors are now protected, contractors should strongly consider having proper reporting and investigation procedures for complaints from employees of subcontractors. 

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OFCCP Significantly Overhauls Its Compensation Standards

On February 26, 2013, the Office of Federal Contract Compliance Programs (“OFCCP”) announced a significant shift in its approach to analyzing contractors’ compensation decisions during audits.  In the press release, OFCCP stated that it was rescinding its “Voluntary Guidelines” and “Compensation Standards” from 2006 because they “limited OFCCP’s ability to conduct full investigations and use every enforcement tool at its disposal to combat pay discrimination.”  In its place, OFCCP issued Directive 307, which establishes many new practices and procedures OFCCP will follow when investigating contractors’ compensation practices during audits. The new procedures took effect on February 28, 2013.

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The National Defense Authorization Act for Fiscal Year 2013 Adds New Whistleblower Protections for Employees of Federal Contractors and Subcontractors

On January 2, 2013, President Obama signed into law Sections 827 and 828 of the National Defense Authorization Act for Fiscal Year 2013 (“NDAA”) to strengthen whistleblower protections for employees of federal contractors and subcontractors.  Specifically, the NDAA (1) enhanced whistleblower protections for employees of contractors and subcontractors of the Department of Defense (“DoD”) and the National Aeronautics and Space Administration (“NASA”); and (2) established a four-year pilot program to increase whistleblower protections for employees of all contractors and subcontractors of federal executive agencies. 

Pilot Program

Protected Whistleblowers Defined

The pilot program under the NDAA prohibits federal executive agency contractors and subcontractors from retaliating against their employees for disclosing information the employees “reasonably believe” is evidence of any of the following:

  • “Gross mismanagement” of a federal contract or grant;
  • “Gross waste” of federal funds;
  • “Abuse of authority” relating to a federal contract or grant;
  • Violation of law, rule, or regulation related to a federal contract or grant; or
  • Substantial and specific danger to public health or safety.

These disclosures are protected when made to certain entities or individuals, including a Member of Congress, an Inspector General of a federal executive agency, a federal employee responsible for contract or grant oversight at the relevant agency, a court or grand jury, an authorized official at a law enforcement agency, or an employee of the contractor or subcontractor who has the responsibility to investigate, discover, or address the misconduct.  The whistleblower protections provided by the pilot program cannot be waived or modified by agreement, policy, form, or condition of employment.

Enforcement Procedures and Remedies

The pilot program contains specific administrative and judicial complaint and investigation procedures for whistleblowers of federal contractors and subcontractors.  Under these procedures, a covered whistleblower may submit a complaint to the Inspector General of the relevant executive agency no more than three years after the date on which the alleged retaliation occurred.  The Inspector General must investigate the complaint unless the Inspector General determines the complaint is frivolous, fails to allege a violation under the pilot program, or has been previously addressed in another formal proceeding.  Unless an extension is agreed to by the whistleblower, the Inspector General must complete its investigation and submit a report of its findings within at 180 days to the whistleblower, the affected contractor or subcontractor, and the head of the agency.

Within thirty days of receiving the Inspector General report, the head of the executive agency must issue an order either denying relief to the whistleblower or ordering one or more of the following actions: (1) order the contractor to take affirmative action to abate the reprisal; (2) order the contractor to pay compensatory damages, back pay, and reinstate the whistleblower to the position the whistleblower held immediately before the reprisal; and/or (3) order the contractor to pay the whistleblower all costs and expenses that were reasonably incurred by the whistleblower, including attorneys’ fees and expert witnesses’ fees.

If the agency denies the whistleblower relief or the agency has not issued an order within 210 days after the initial complaint was submitted, the whistleblower can file a civil action in appropriate federal district court for a de novo review of his or her claims.  The action cannot be filed more than two years after the whistleblower’s administrative remedies have been exhausted.

If the agency finds in favor of the whistleblower and it determines that the contractor has failed to comply with its order, it may pursue a federal action against the contractor seeking injunctive relief, damages, and attorneys’ fees and costs.  The whistleblower may join in this action with the agency.

In addition, any person adversely affected or aggrieved by the agency’s order may directly petition the federal appellate court where the reprisal allegedly occurred.  The petition must be filed within 60 days after the order is issued.  The appeal, however, will not stay the enforcement of the agency’s order, unless the court specially grants a stay.

Study and Report to Congress

The Comptroller General must begin conducting a study within the next three years to evaluate the pilot program and must submit within the next four years a report to Congress on the results of that study, which includes findings and recommendations on the pilot program.

Enhanced Whistleblower Protections for DoD and NASA Contractors

10 U.S.C. Section 2409 already included whistleblower protections for employees of DoD and NASA contractors.  The NDAA expanded these whistleblower protections by amending 10 U.S.C. Section 2409 to include employees of DoD and NASA subcontractors and added disclosures relating to an “abuse of authority” on a DoD or NASA contract to the list of protected disclosures.  It also amended the administrative and judicial enforcement provisions to mirror those under the pilot program. 

Agency Notification Requirement

The head of each executive agency must ensure that all contractors and subcontractors with that agency inform their employees in writing of each of these new whistleblower protections.  The notification must be in the predominant native language of the contractors’ or subcontractors’ workforce.

 Effective Date and Coverage

The new whistleblower protections will take effect on July 1, 2013 and apply to all contracts awarded or modified on or after that date or task orders entered on or after that date.  These whistleblower provisions, however, do not apply to a disclosure of any activity relating to an “element of the intelligence community,” as defined in the National Security Act of 1974, or that was discovered as a result of the performance of a contract or subcontract with an element of the intelligence community.  In addition, the Federal Acquisition Regulations must be revised by July 1, 2013 to implement the new whistleblower requirements. 

Implications for Federal Contractors and Subcontractors

The new whistleblower provisions in the NDAA continue the trend of federal legislation aimed at increasing protections for whistleblower in order to encourage them to report unlawful, corrupt, or unethical behavior.  These new protections emphasis the need for federal contractors and subcontractors to ensure they have adequate whistleblower complaint and reporting procedures in place.  Such efforts include conducting whistleblower training for employees, particularly for managers and high level officials, reviewing and updating whistleblower policies, and establishing or reviewing whistleblower complaint procedures.

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Administrative Review Board Finds That Participation in TRICARE Did Not Subject Florida Hospital to OFCCP’s Jurisdiction

On October 19, 2012, the Department of Labor’s Administrative Review Board (“ARB”) found in OFCCP v. Florida Hospital of Orlando that the OFCCP did not have jurisdiction over a federal contractor based solely on its participation in TRICARE. The ARB, however, left open whether other healthcare contractors participating in TRICARE would be subject to OFCCP’s jurisdiction.


TRICARE is a program sponsored by the Department of Defense (“DoD”) that pays for medical benefits for active and retired military personnel and their families. There are three prime contractors that administer the TRICARE program. These three contractors enter into subcontracts with hospitals and medical providers to provide medical care and supplies to TRICARE participants. Florida Hospital held a subcontract with one of the TRICARE prime contractors.

In August 2007, OFCCP scheduled Florida Hospital’s Orlando establishment for a compliance review. Florida Hospital refused to submit to OFCCP’s compliance review, asserting that it was not subject to OFCCP’s jurisdiction. OFCCP initiated enforcement proceedings arguing that Florida Hospital’s participation in TRICARE subjected it to OFCCP jurisdiction.

On October 18, 2010, an Administrative Law Judge (“ALJ”) found that Florida Hospital was a federal subcontractor because it assumed the performance of the TRICARE prime contractor’s obligation to the federal government. The ALJ also rejected Florida Hospital’s argument that TRICARE payments did not subject it to OFCCP’s jurisdiction because it was federal financial assistance. Florida Hospital appealed the decision to the ARB.

While the decision was pending appeal, on December 31, 2011, the National Defense Authorization Action for Fiscal Year 2012 (“NDAA”) was signed into law. The NDAA expressly stated that medical providers who participated in TRICARE were exempt from OFCCP’s jurisdiction.

ARB’s Decision

The ARB reviewed the NDAA exemption and held that OFCCP lacked jurisdiction over Florida Hospital because it met the specific language in the NDAA exemption. The ARB, however, found that the exemption was narrow and would only exempt TRICARE contractors that require establishment and management of a network of providers. The ARB indicated that it would review OFCCP’s jurisdiction over other TRICARE subcontractors on a “case by case” basis.

Because the ARB has left open the possibility that some TRICARE subcontractors may be covered by OFCCP’s jurisdiction, healthcare contractors must closely scrutinize their participation in TRICARE to see if they are subject to OFCCP’s jurisdiction.

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FAR Council Issues Proposed Rule That Would Require Contractors to Safeguard Their Information Systems

On August 24, 2012, the Department of Defense, the General Services Administration, and the National Aeronautics and Space Administration (“FAR Council”) issued a Proposed Rule that would require contractors to implement basic safeguards for their information systems to protect non-public information and data of the federal government provided by or generated for the government (“Government Information”). The Proposed Rule adopts most of the “basic” requirements from the Advance Notice of Proposed Rulemaking issued by the Department of Defense on March 3, 2012.

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Final Rule Issued That Requires Contractors to Report Annually Executive Compensation and First-Tier Subcontract Awards

On July 26, 2012, the Department of Defense, General Services Administration, and the National Aeronautics and Space Administration issued a final rule requiring federal prime contractors to provide annual reports to the Central Contractor Registration database concerning executive compensation and first-tier subcontract awards. The final rule also amends the Federal Acquisition Regulation (“FAR”) Subpart 4.14 to implement section 2 of the Federal Funding Accountability and Transparency Act of 2006 (“FFATA”). This amendment requires the Office of Management and Budget to create a free, publicly available website with information about all federal contract awards.

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DoD, GSA, and NASA Issue Proposed Rule Implementing Executive Order Requiring Certain Contractors to Hire Predecessor Employees

On May 3, 2012, the Department of Defense (“DoD”), the General Services Administration (“GSA”), and the National Aeronautics and Space Administration (“NASA”) issued a proposed rule implementing Executive Order 13495, Nondisplacement of Qualified Workers Under Service Contracts (“EO 13495”) and the Department of Labor’s (“DOL’s”) final regulations implementing EO 13495.  EO 13495 was initially signed by President Obama on January 30, 2009.  It requires federal contractors and subcontractors that are successors to certain government contracts to offer employment on a “first right of refusal” to employees (not including managerial and supervisory employees) employed under the predecessor contract, whose employment would otherwise be terminated at the end of the predecessor contract.

 As we previously reported, on August 29, 2011, the DOL issued final regulations that implemented EO 13495 and clarified many of the terms in that Executive Order.  The proposed rule issued by DoD, GSA, and NASA would amend the Federal Acquisition Regulations (“FAR”) to add subpart 22.12 and a new clause at FAR 52.222-XX to require service contractors and their subcontractors under successor contracts to offer employees of the predecessor contractor a right of first refusal of employment for all positions for which they are qualified.  The proposed rule contemplates amending the FAR clause so that it is virtually identical to DOL’s final regulations, except it will not include provisions concerning the investigative methods, available reviews, or enforcement mechanisms established by the DOL.

 Comments on the proposed rule are due by July 2, 2012.

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Filed under Department of Defense, Department of Labor, Service Contract Act (SCA)