B-33727, APRIL 27, 1943, 22 COMP. GEN. 993

B-33727: Apr 27, 1943

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- INCLUDING AMOUNTS PAID IN SATISFACTION OF FINAL JUDGMENTS AND ATTORNEYS' FEES IF IT IS IMPOSSIBLE OR IMPRACTICABLE TO PROVIDE GOVERNMENT COUNSEL. - WHERE IT IS ADMINISTRATIVELY DETERMINED TO BE IN THE BEST INTERESTS OF THE GOVERNMENT TO HAVE THE CONTRACTORS RESIST SUCH SUITS RATHER THAN TO PAY THE OVERTIME BENEFITS PROVIDED FOR IN THE ACT. 1943: I HAVE YOUR LETTER OF APRIL 7. IT HAS BEEN THE UNDERSTANDING OF THE WAR DEPARTMENT THAT NON-MANUAL EMPLOYEES OF THESE CONTRACTORS WERE NOT ENTITLED TO RECEIVE TIME AND ONE-HALF FOR OVERTIME UNDER THE PROVISIONS OF THE FAIR LABOR STANDARDS ACT ( ACT OF JUNE 25. THE SALARY SCALES HITHERTO PAID SUCH EMPLOYEES HAVE BEEN DETERMINED AND APPROVED ON THIS ASSUMPTION.

B-33727, APRIL 27, 1943, 22 COMP. GEN. 993

CONTRACTS - COST-PLUS - EXPENSES AND JUDGMENT PAYMENTS INCIDENT TO FAIR LABOR STANDARDS ACT LITIGATION UNDER COST-PLUS-A-FIXED-FEE CONTRACTS COVERING THE CONSTRUCTION OF ORDNANCE PLANTS, ETC., AND PROVIDING FOR REIMBURSEMENT TO THE CONTRACTORS FOR ALL LABOR AND FOR LOSSES AND EXPENSES SUSTAINED OR INCURRED IN CONNECTION WITH THE CONTRACT WORK, THE CONTRACTORS MAY BE REIMBURSED FOR PROPERLY SUBSTANTIATED AND APPROVED COSTS DIRECTLY ATTRIBUTABLE TO CIVIL SUITS INSTITUTED AGAINST THEM BY EMPLOYEES UNDER THE FAIR LABOR STANDARDS ACT OF 1938--- INCLUDING AMOUNTS PAID IN SATISFACTION OF FINAL JUDGMENTS AND ATTORNEYS' FEES IF IT IS IMPOSSIBLE OR IMPRACTICABLE TO PROVIDE GOVERNMENT COUNSEL--- WHERE IT IS ADMINISTRATIVELY DETERMINED TO BE IN THE BEST INTERESTS OF THE GOVERNMENT TO HAVE THE CONTRACTORS RESIST SUCH SUITS RATHER THAN TO PAY THE OVERTIME BENEFITS PROVIDED FOR IN THE ACT.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF WAR, APRIL 27, 1943:

I HAVE YOUR LETTER OF APRIL 7, 1943, AS FOLLOWS:

THE WAR DEPARTMENT IN THE PAST TWO YEARS HAS ENTERED INTO A NUMBER OF COST-PLUS-A-FIXED-FEE CONTRACTS FOR THE CONSTRUCTION OF CAMPS, ORDNANCE PLANTS AND OTHER MILITARY INSTALLATIONS. IT HAS BEEN THE UNDERSTANDING OF THE WAR DEPARTMENT THAT NON-MANUAL EMPLOYEES OF THESE CONTRACTORS WERE NOT ENTITLED TO RECEIVE TIME AND ONE-HALF FOR OVERTIME UNDER THE PROVISIONS OF THE FAIR LABOR STANDARDS ACT ( ACT OF JUNE 25, 1938, 52 STAT. 1060, 29 U.S.C. 201-19), AND THE SALARY SCALES HITHERTO PAID SUCH EMPLOYEES HAVE BEEN DETERMINED AND APPROVED ON THIS ASSUMPTION.

RECENTLY, A NUMBER OF SUCH NON-MANUAL EMPLOYEES HAVE COMMENCED ACTIONS AT LAW AGAINST THE CONTRACTORS WHO EMPLOYED THEM, SEEKING THE RECOVERY OF OVERTIME PAY AND PENALTIES UNDER THE FAIR LABOR STANDARDS ACT. THE TOTAL OF ALL POTENTIAL CLAIMS OF THIS NATURE INVOLVES A VERY LARGE SUM OF MONEY, AND IT IS BELIEVED THAT THE COST-PLUS-A-FIXED-FEE CONTRACTORS WILL NOT ONLY EXPECT REIMBURSEMENT FOR ALL OVERTIME PAYMENTS THEY ARE FORCED TO MAKE AS A RESULT OF SUCH ACTIONS, BUT ALSO WILL CLAIM REIMBURSEMENT FOR ANY PENALTIES THEY ARE FORCED TO PAY AND THE COSTS AND EXPENSES OF LITIGATION. (SEE SECTION 16 OF THE ACT, 29 U.S.C. 216). ACCORDINGLY, THE WAR DEPARTMENT WILL BE CALLED UPON TO ADVISE SUCH CONTRACTORS AS TO WHETHER OR NOT THEY WILL BE ENTITLED TO RECEIVE REIMBURSEMENT UNDER THEIR CONTRACTS FOR ANY AMOUNTS FOR WHICH FINAL JUDGMENTS MAY BE ENTERED AGAINST THEM AND FOR THE COSTS AND EXPENSES OF LITIGATION IN SUCH ACTIONS.

THE POLICY OF THE WAR DEPARTMENT WILL BE TO PERMIT RESISTANCE TO THESE CLAIMS ONLY WHERE, IN THE OPINION OF THE DEPARTMENT, THE CLAIM IS NOT LEGALLY MERITORIOUS AND PAYMENT OF OVERTIME HAS NOT BEEN CUSTOMARY WITHIN THE TRADE OR INDUSTRY INVOLVED. IN SUCH CASES, THE WAR DEPARTMENT WILL MAKE AVAILABLE TO CONTRACTORS THE SERVICES OF THE LITIGATION OFFICERS OF THE JUDGE ADVOCATE GENERAL'S OFFICE TO DEFEND THE ACTIONS COMMENCED. THERE MAY BE A FEW CASES, HOWEVER, WHERE IT IS EITHER IMPRACTICAL OR IMPOSSIBLE TO FURNISH THE SERVICES OF SUCH LITIGATION OFFICERS, AND IN SUCH CASES THE WAR DEPARTMENT WILL AUTHORIZE CONTRACTORS TO RETAIN PRIVATE COUNSEL.

THE WAR DEPARTMENT BELIEVES THAT THE ABOVE REFERRED TO ITEMS ARE PROPERLY REIMBURSABLE, WHEN INCURRED WITH THE APPROVAL OF THE CONTRACTING OFFICER, AND THAT IF CONTRACTORS CAN BE SO ADVISED SERIOUS FINANCIAL UNCERTAINTIES ON THEIR PART WILL BE ELIMINATED AND THE CONSTRUCTION AND PRODUCTION WORK ON WHICH THEY ARE ENGAGED WILL BE BENEFITED AND EXPEDITED CORRESPONDINGLY. IN ORDER THAT INSTRUCTIONS AND ADVICE WITH RESPECT TO THE QUESTIONS RAISED MAY BE GIVEN TO CONTRACTORS, YOUR OPINION ON THE FOLLOWING QUESTION WILL BE APPRECIATED.

MAY COST-PLUS-A-FIXED-FEE CONTRACTORS WITH THE WAR DEPARTMENT BE REIMBURSED FOR (A) ALL AMOUNTS PAID IN SATISFACTION OF FINAL JUDGMENTS ENTERED AGAINST THEM IN CIVIL ACTIONS BROUGHT UNDER THE PROVISIONS OF THE FAIR LABOR STANDARDS ACT WHERE DEFENSE OF THE ACTION HAS BEEN AUTHORIZED BY THE CONTRACTING OFFICER AND (B) THE REASONABLE AND NECESSARY COSTS AND EXPENSES OF LITIGATION AS APPROVED BY THE CONTRACTING OFFICER?

WHILE ORDINARILY THERE IS NOTHING CONTAINED IN COST-PLUS-A-FIXED-FEE CONTRACTS COVERING CONSTRUCTION OF ORDNANCE PLANTS, ETC., EXPRESSLY PROVIDING THAT LITIGATION EXPENSES AND EXPENSES RELATING THERETO ARE TO BE PAID BY THE GOVERNMENT, SUCH CONTRACTS GENERALLY PROVIDE FOR REIMBURSEMENT TO THE CONTRACTORS FOR ALL LABOR AND FOR LOSSES AND EXPENSES SUSTAINED OR INCURRED IN CONNECTION WITH THE WORK TO BE PERFORMED, AND FOUND AND CERTIFIED BY THE CONTRACTING OFFICER IN ACCORDANCE WITH THE PERTINENT PROVISIONS OF THE PARTICULAR CONTRACT INVOLVED. ACCORDINGLY, WHERE IT IS ADMINISTRATIVELY DETERMINED TO BE TO THE BEST INTERESTS OF THE GOVERNMENT FOR THE CONTRACTORS TO RESIST CIVIL SUITS INSTITUTED AGAINST THEM UNDER THE FAIR LABOR STANDARDS ACT, RATHER THAN TO PAY THE OVERTIME BENEFITS PROVIDED FOR THEREIN, AND IT IS IMPOSSIBLE OR IMPRACTICABLE TO FURNISH GOVERNMENT ATTORNEYS TO REPRESENT THE CONTRACTORS THERE WOULD APPEAR TO BE NO LEGAL OBJECTION TO REIMBURSING THE CONTRACTORS FOR PROPERLY SUBSTANTIATED AND APPROVED COSTS DIRECTLY ATTRIBUTABLE TO SAID SUITS. SEE CENTRAL CONSTRUCTION CORPORATION V. UNITED STATES, 63 C. CLS. 290, 296; ALSO, SEE 22 COMP. GEN. 109.