DOL to Scrap Prior Independent Contractor Rule
The U.S. Department of Labor’s Wage and Hour Division will stop enforcing the prior administration’s rule to determine whether workers are “independent contractors” or “employees” under federal wage-and-hour laws.
The definition of “independent contractor” is important because it determines whether the Fair Labor Standards Act (“FLSA”) applies to particular workers. Only employees (not independent contractors) are covered under the FLSA’s regulations on minimum wages, overtime, and record-keeping. So, in order to comply with federal labor laws, employers need to understand the difference between employees and independent contractors in order to correctly classify workers.
On May 1, the DOL issued a field assistance bulletin announcing that, when conducting FLSA investigations over worker classifications, the Wage and Hour Division will stop applying a rule established only last year. The “2024 Rule” had been the controlling standard for audits and compliance actions. And while the 2024 Rule remains in effect for purposes of private litigation, the DOL will not apply the rule in department investigations. Instead, the DOL will once again enforce the FLSA based on guidance in Fact Sheet 13, first published in July 2008, and an Opinion Letter that was first published on April 29, 2019, later withdrawn, and reissued on May 2.
Enforcing the FLSA Based on Guidance From 2008
In enforcing the FLSA, the DOL will look to Fact Sheet 13, which outlines seven non-determinative factors for worker classification. Among the factors the DOL will consider significant are:
The extent to which the services rendered are an integral part of the principal’s business;
The permanency of the relationship;
The amount of the alleged contractor’s investment in facilities and equipment;
The nature and degree of control by the principal;
The alleged contractor’s opportunities for profit and loss;
The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor; and
The degree of independent business organization and operation.
Leading Up To the DOL’s Decision
Historically, the DOL did not define the term “independent contractor” through regulation and, instead, relied on informal guidance, such as Fact Sheet 13. In 2020, the DOL proposed a five-factor test for when a worker is an independent contractor, emphasizing the principal’s right to control and the worker’s opportunity for profit or loss. The rule was finalized in 2021, under current President Donald Trump’s first administration. However, almost immediately the new rule faced legal challenges and was later rescinded under the subsequent administration.
Then, on January 9, 2024, the DOL published a different final rule defining the term “independent contractor” under the FLSA. The rule, established under former President Joe Biden, introduced a six-factor “economic realities” test. The six-factor test focused on the economic dynamics between employers and workers by examining: opportunity for profit or loss depending on managerial skill; investments by the worker and the employer; degree of permanence of the work relationship; nature and degree of control; extent to which the work performed was an integral part of the employer’s business; and skill and initiative.
The 2024 Rule triggered a number of lawsuits challenging the legality of the rule. These suits are currently pending in district courts across the country and, with a new administration in place, the DOL is taking the position in those lawsuits that it is reconsidering the 2024 Rule and considering rescinding the regulation. In its field assistance bulletin on May 1, the DOL reiterated that it is “currently reviewing and developing the appropriate standard for determining FLSA employee versus independent contractor status.”
Since the 2024 Rule has not yet been rescinded, employers should take a cautious approach for now and continue to monitor the situation for further developments. At the same time, employers should be mindful of the new guidance when it comes to enforcement actions.
WhatsApp? A Legally Binding Contract….
In the recent case of Jaevee Homes Limited v. Mr Steven Fincham, the English High Court has handed down judgment that an exchange of WhatsApp messages between the parties formed a basic and legally binding contract, providing a reminder to parties involved in pre-contract discussions to exercise caution.
Background facts
The case centred around a contractual dispute between a property developer, Jaevee Homes Limited (“Claimant”) and a demolition contractor, Steve Fincham, trading as Fincham Demolition (“Defendant”) who the Claimant had hired to undertake demolition works. The parties exchanged WhatsApp messages in April-May 2023 regarding the work with the Claimant confirming the job via WhatsApp on 17 May 2023. On 26 May 2023, a formal subcontract and purchase order was emailed on the behalf of the Claimant to the Defendant however, it was never signed or acknowledged.
The key issue in dispute was determining the exact terms of the contract between the parties, particularly in relation to the payment terms. The Claimant argued that the terms of the written subcontract which incorporated its standard terms and sent to the defendant on 26 May 2023 were binding. On the other hand, the Defendant believed that a basic contract had been formed as a result of WhatsApp messages exchanged on 17 May 2023.
Outcome
The basic criteria for concluding most types of legally binding contract under English is well established: one party makes an offer which the other accepts and some money (or something else of at least nominal value) must pass between the parties. Importantly though, in most cases there is no requirement for a contract to be reduced to writing and signed by the parties nor is there any requirement for acceptance to be formally communicated with acceptance by conduct or implication being very common.
In reaching a decision in this case, the Judge applied these principles, using a common sense and contextual approach when reviewing the WhatsApp messages which had passed between the parties. As a result the Judge confirmed that the messages “whilst informal, evidenced and constituted a concluded contract” as opposed to pre-contractual negotiations. Although the messages did not agree all aspects concerning payment, the messages did confirm the relevant fees, scope of work and final date of payment.
In particular, the Judge focused on a relatively informal exchange of messages between the parties on 17 May 2023 in which the Defendant asked “Are we saying it’s my job mate so I can start getting organised mate” to which the Claimant responded “Yes”, holding that meant a legally binding contract had come into force on that date.
The Judge went on to note that at this point “there was no express indication that the final terms of the agreement between the Parties depended upon agreement as to any other matter such as incorporation of the Claimant’s standard terms”. Therefore, the subcontract and purchase order issued to the Defendant on 26 May which had never been signed or acknowledged by the Defendant were irrelevant as a legally binding contract had already come into force nine days before.
Impact of the ruling
This judgment is a helpful reminder that under English contract law, it is easy to (inadvertently) create a legally binding contract and that caution should be exercised when engaging in informal pre-contract discussions. In particular, if a party’s position is that any award of work is made subject to its standard terms or the conclusion of a formal written contract, that should be clearly stated in discussions and work not allowed to commence until a formal written contract has been concluded. If a written contract is concluded, that should contain an “entire agreement” clause which seeks to exclude any pre-contract discussions to provide certainty that neither party will be able to rely on statements or representations made during discussions which are not reflected in the final written contract.
Competitive Range Determination Violated the FAR, Court Finds
The U.S. Court of Federal Claims recently issued a significant opinion in Gemini Tech Servs., LLC v. United States, holding that the Army’s failure to follow required procedures under the Federal Acquisition Regulation (FAR) in establishing a competitive range for a logistics support procurement at Redstone Arsenal, Alabama, prejudiced the protestor and warranted injunctive relief. The decision highlights critical compliance responsibilities under FAR Part 15 and reinforces the limitations on agency discretion during negotiated procurements.
Background: The Redstone Arsenal Solicitation
The dispute arose from Solicitation No. W519TC-23-R-0094, issued by the Army on October 3, 2023, for logistics support services under its Enhanced Army Global Logistics Enterprise (EAGLE) vehicle. The solicitation, designated as a competitive 8(a) small business set-aside, implemented a three-step, best-value selection process. Step 1 focused on technical acceptability; Step 2 evaluated past performance and price realism; and Step 3 entailed award to the lowest-priced offeror with a substantial confidence rating.
The solicitation required the Army to first screen proposals for strict compliance, then evaluate them for technical acceptability on an acceptable/unacceptable basis. Importantly, only the three lowest priced, technically acceptable proposals were to advance beyond Step 1.
The Evaluation Breakdown
The Army received six proposals. After several iterations of evaluation by the Technical Evaluation Team (TET), only one — Gemini’s — was found technically acceptable. Despite this, the contracting officer made the decision to open discussions with all six offerors to promote efficiency and maximize competition.
However, FAR 15.306(c)(1) states that if discussions are to be held, the agency must establish a “competitive range” comprised only of “the most highly rated proposals” based on “all evaluation criteria.” The Army’s determination lacked any documented analysis comparing ratings across the relevant factors. Moreover, it erroneously claimed that all offerors, including Gemini, were technically unacceptable — an error that directly undercut the procedural foundation for opening discussions.
Protest and Holding
Gemini initially challenged the award before the Government Accountability Office (GAO), which denied the protest. The GAO reasoned that because the solicitation allowed discussions “at any stage,” the Army retained discretion to open discussions before finalizing technical ratings.
Gemini then filed suit in the Court of Federal Claims. In contrast to the GAO, the court held that the Army’s decision to open discussions violated FAR 15.306(c)(1) by failing to base the competitive range on ratings against all evaluation criteria. The court emphasized that an agency’s discretion must still be exercised within the bounds of the FAR’s procedural mandates.
The Army’s justification — that opening discussions was in the government’s best interest — was insufficient, the court found. Without first determining which proposals were the most highly rated, the agency’s competitive range determination was legally defective.
Prejudice and Injunctive Relief
The court also found that Gemini was prejudiced by the error. But for the Army’s improper inclusion of other offerors in the competitive range, Gemini would have had a substantial chance at award. Notably, JP Logistics — the only offeror whose proposal was initially deemed incapable of being made acceptable — ultimately received the contract award after the Army revised its findings during discussions. The court concluded this outcome could have been different had the Army complied with FAR 15.306(c)(1) from the outset.
As a result, the court granted Gemini’s motion for judgment on the administrative record, denied the government’s and intervenor’s cross-motions, and ordered a new award decision.
Key Takeaways for Contractors and Agencies
This decision reinforces several important principles:
FAR Compliance Is Not Optional – Even broad agency discretion under FAR Part 15 is constrained by procedural requirements. Agencies must base the competitive range on documented evaluations against all criteria, not just operational convenience or generalized efficiency.
Evaluative Errors Must Be Material – The court found that the Army’s error — while seemingly procedural — was material because it altered the structure of competition and resulted in prejudice to a compliant offeror.
GAO vs. COFC – The divergence between GAO and the Court of Federal Claims illustrates that COFC may take a stricter view of procurement law compliance, especially where FAR mandates are explicit.
Documentation Matters – The Army’s inconsistent and conflicting internal documentation undermined its legal position. Agencies should ensure that evaluation and award decisions are consistently documented and aligned with the record.
This case serves as a reminder to both government and industry players that even well-intentioned efforts to streamline competition must remain grounded in regulatory compliance.
Conclusion
The court’s ruling in Gemini Tech Servs. underscores the importance of maintaining strict adherence to FAR procedures, especially when setting a competitive range and opening discussions. For contractors, it offers a roadmap for identifying and challenging missteps in an agency’s establishment of a competitive range. For agencies, it’s a cautionary tale on the risks of informal deviations from regulatory norms, even in the interest of expediency.
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Achieving DEI Compliance…On Your Website
Diversity, Equity & Inclusion (DEI) efforts, and the term itself, have become increasingly scrutinized and subjected to legal challenges by both government and private actors, making an understanding of the current DEI climate and applicable law critical to organizations advancing efforts to support DEI initiatives. DEI focuses on the elimination of barriers to opportunities for all to achieve goals of fair treatment, which should have the effect of expanding the demographics of an organization. The current White House administration, with the stated purpose of providing for fair treatment and equal protection of all people, has rescinded or limited certain previous executive orders and promulgated policies against “illegal” DEI but has not defined what “illegal DEI” includes. As a result, many universities and businesses that rely on federal funding have curtailed their efforts out of fear that the administration may consider their organization’s initiatives “illegal.” However, you can have compliant DEI initiatives referenced on your website that do not violate the law and are not contrary to the current administration’s objective to provide fair treatment and equal protection for all.
It is not illegal for universities and businesses to prioritize increasing diversity. However, “diversity” should be construed to be inclusive of, and offer opportunities to, all races, genders, and backgrounds rather than interpreted myopically. Neither the rescission of executive orders from previous administrations nor the issuance of new executive orders by the current administration gives employers and businesses the right to discriminate. Discrimination against anyone based on an immutable characteristic (such as race) is illegal. Only Congress can repeal current federal law. None of the current civil rights laws have been touched, including, without limitation, those passed following the Civil War and during the Civil Rights Movement of the 1960’s (e.g., Section 1981 of the Civil Rights Act of 1866 and Title VII of the Civil Rights Act of 1964, both of which remain the applicable law today). So, consult your attorney and continue to abide by the law.
Key Considerations for Current State of the Law
Executive Order 14151 (Ending Radical and Wasteful Government DEI Programs and Preferencing) (“EO 14151”). On January 20, 2025, the current administration published EO 14151, which rescinded EO 13985, a Biden-era executive order titled “Advancing Racial Equity and Support for Underserved Communities Through the Federal Government.” EO 13985 required federal agencies and departments to implement “Equity Action Plans” to identify and remove barriers to equal participation in and access to federal benefits and services, barriers to benefiting from federal agency procurement and contracting programs, and other government programs. EO 14151 terminates the requirement for federal agencies to prepare and submit these plans. EO 14151 also requires federal agencies to terminate all “equity-related” grants or contracts that were intended to assist the agencies in meeting their DEI objectives and all DEI or DEIA performance requirements for employees, contractors, or grantees. Certain aspects of EO 14151 are subject to current litigation, which should be monitored closely. You can read here to review highlights of some of the ongoing litigation.
Executive Order 14173 (Ending Illegal Discrimination and Restoring Merit-Based Opportunity) (“EO 14173”). On January 21, 2025, the current administration published EO 14173, which rescinds EO 11246 (a 60-year-old civil rights era directive signed by President Lyndon B. Johnson). EO 11246 (and its subsequent amendments through additional executive orders) required federal contractors and subcontractors to refrain from discrimination in hiring, promotion, compensation, and employment practices based on race, color, religion, sex, sexual orientation, gender identity, and national origin. EO 11246 also required those contractors to engage in affirmative action practices for women and minorities. EO 14173 eliminates all affirmative action obligations with respect to women and minorities, and it requires federal contractors and subcontractors “to certify” that they do “not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.” EO 14173 currently is in ongoing litigation, which should be followed closely. Employers should note that Title VII of the Civil Rights Act of 1964 is still the law and should ensure that they are complying with the equal employment opportunity requirements therein. You can read here for a more detailed breakdown of EO 14173.
The current administration has stated that it will continue to follow the law. Federal law, such as Title VII, prohibits (unless a clear illustration of historic disparate treatment can be shown) “affirmative action” and, by extension, DEI programs that provide any advantage to any person based on race, gender, or other immutable characteristic. The guidelines published by the Equal Employment Opportunity Commission state that discrimination based on race, color, religion, sex, or national origin violates Title VII (as stated in the Supreme Court case McDonald v. Santa Fe Trail Transportation Co., 427 U.S. 273, 12 EPD (1976)). For more information on how your company can lawfully promote equal opportunity considerations on your website, always consult with a labor & employment attorney.
Key Considerations: Applicable/Current Law
Section 1981 of the Civil Rights Act of 1866. All persons within the jurisdiction of the United States shall have the same right in every state and territory to make and enforce contracts, to sue, to be parties, to give evidence, and to receive the same full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other. The application of the law protects all persons from discrimination in contracting based on race.
Title VII of the Civil Rights Act of 1964 prohibits discrimination based on race, color, religion, sex (including pregnancy), and national origin. It gives a private right of action to employees to sue their employers for violating the law. Title VII is broader than Section 1981 (referenced above) and remains the principal employment anti-discrimination law in the United States.
The concept of quotas (i.e., identifying a number of persons of a specific race for employment or enrollment) has been explicitly forbidden under federal law for some time. The concept associating quotas with illegal conduct was further reemphasized within EO 14173. Therefore, no DEI initiative should encourage or be premised upon quotas.
The following recommendations are worthy of consideration:
Mission Objectives
Focus on the elimination of barriers and creating opportunities for all. “Inclusion” is a keystone of DEI, and when you eliminate barriers, you are far more likely to include everyone — whether in a decision-making role or when taking steps to advance organizational priorities.
When focusing on diversity, emphasize seeking diversity of viewpoints on your website, concerning the primary subject area. The point of DEI is not simply to have a broad sector of races and ethnicities but to have different views and perspectives, which often emanate from differences between individuals (whether that be due to environment or otherwise — e.g., urban versus rural, first-generation college student, or economically disadvantaged). You also should express how your DEI efforts remove barriers to entry and barriers to success for your target audience.
DEI efforts and initiatives should be focused on ensuring the organization’s systems, policies, and processes are intentional, equitable, fair, and structured in a manner to minimize bias. A systems-focused approach is one that helps everyone but also goes a long way to close gaps and remove barriers for the most marginalized. In this manner, the focus is on the macro and not on specific programs, which, if not made accessible to all, can run afoul of non-discrimination law.
Application Process
If you have an application for admissions, grants, or scholarships on your website, create a prompt that asks the applicant to explain how they plan to effect [insert your diversity criteria] change in the U.S. and/or how they may have felt subjected to discriminatory practices in relation to the purpose of the application. Do not seek information on a particular applicant’s immutable characteristics or premise a selection or award on this information.
Require application candidates to discuss their individual, historical circumstances and how they have affected their current situation rather than have your company, university, or organization make assumptions associated with historical circumstances based on immutable characteristics. This step works to your organization’s advantage because it provides a deeper look into an applicant’s individual circumstance and makes no assumption based on immutable characteristics, which is the cornerstone of illegal discrimination.
Use of Language
Consider how the name of your organization can help or hinder your outreach. For example, affinity groups should always be open to all. However, many affinity groups utilize an immutable characteristic in their name (e.g., Black Law Students Affinity Group). Adding a reminder on multiple pages of your website and application materials that the affinity group is open to all could be helpful in reducing legal risk. Stating that a program is being presented by “[Diversity X Organization]” is legal, whereas stating that a program is “only” for Black or White people is not. When naming a new organization, consider the intended demographic that you are trying to reach when selecting the name of the organization and how that may impact your legal risks.
Remember, diversity of ideas and approaches is more fulsome where anyone can be a member of an organization, without regard to an immutable characteristic (e.g., race or ethnicity).
Note on your website that the application process is “open to all,” including by emphasizing this fact and by noting the process is an equal opportunity for all persons irrespective of race, religion, gender, etc.
For some compliance initiatives, DEI has been used as an umbrella term to capture compliance obligations monitored by human resources departments. For example, under the Americans with Disabilities Act, employers and places of public accommodation are obligated to ensure persons with disabilities can access buildings and resources, and barriers and impairments to successfully working or accessing public locations are eliminated. Some businesses began to group these actions together and label them holistically as DEI. If you feel that the term “DEI” has become too incendiary, then consider language for the policy that is more descriptive, such as “improving success” or “removing barriers” and the like.
Finally, it goes without saying: Follow the law. If you have questions on what is legal or problematic, consult a lawyer, and remember that the laws in your jurisdiction and new executive orders are constantly changing.
How to Become a U.S. Government Contractor: A Legal Guide to the Basics
For many businesses, contracting with the U.S. government represents a significant opportunity for stable and often long-term revenue. However, doing business with the federal government comes with unique requirements, procedures, and compliance obligations. Whether you’re a small startup or an established company considering entering the federal market, understanding the basic steps to becoming a government contractor is essential.
Here’s a legal overview of the fundamental steps to get started:
1. Understand Federal Contracting Basics
Before diving into the registration process, it’s important to understand how government contracting works. The U.S. government is the world’s largest buyer of goods and services. Federal contracts range from supplying office supplies to building infrastructure to providing professional services.
The Federal Acquisition Regulation (FAR) governs how federal agencies acquire goods and services. Contractors must comply with these rules, as well as agency-specific supplements.
2. Obtain a Unique Entity ID and Register with SAM
To do business with the federal government, your company must first:
Obtain a Unique Entity Identifier (UEI) – As of April 2022, the federal government replaced the DUNS number with the UEI, which you can obtain through SAM.gov.
Register in the System for Award Management (SAM) – SAM registration is mandatory for all contractors seeking federal contracts. This process includes submitting basic company information, selecting applicable NAICS codes (which classify your business’s industry), and certifying compliance with various federal regulations.
3. Determine Small Business Status and Set-Asides
If your business qualifies as a small business under SBA size standards (based on your NAICS codes), you may be eligible for set-aside contracts. Special categories include:
Woman-Owned Small Business (WOSB)
Service-Disabled Veteran-Owned Small Business (SDVOSB)
HUBZone Business
8(a) Business Development Program participants
To pursue these opportunities, consider obtaining the relevant certifications from the U.S. Small Business Administration (SBA).
4. Develop a Capability Statement
A capability statement is a concise, targeted document that outlines your company’s qualifications, past performance, core competencies, and differentiators. This is often a critical tool when introducing your business to government buyers or prime contractors.
5. Explore Opportunities and Bid on Contracts
There are several ways to find and pursue government contracting opportunities:
Contract Opportunities on SAM.gov – This is the primary portal for federal solicitations over $25,000.
GSA Schedules – If your product or service is in demand across multiple agencies, you may benefit from getting on a General Services Administration (GSA) Schedule, which streamlines the procurement process.
Subcontracting – Many companies begin as subcontractors to established primes, which can help build experience and credibility in the federal market.
6. Understand Compliance Obligations
Government contractors must comply with various regulations, including:
Labor laws (e.g., Service Contract Act, Davis-Bacon Act)
Equal employment opportunity obligations
Cybersecurity requirements (especially under DFARS and NIST standards for DoD contracts)
Ethics and anti-kickback rules
You should establish internal compliance policies and consult with legal counsel to ensure your operations align with federal expectations.
7. Keep Registrations and Certifications Current
Once you’re registered and active in government contracting, it’s critical to:
Update your SAM registration annually
Maintain certifications and eligibility status
Track performance metrics and customer feedback
Stay informed of regulatory changes
Final Thoughts
Becoming a U.S. government contractor is not a one-step process — it requires legal and administrative diligence, strategic planning, and ongoing compliance. Partnering with experienced advisors, legal counsel, or procurement consultants can streamline your entry into this lucrative market. For companies ready to invest the time and resources, government contracting offers a pathway to sustained business growth and stability.
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Calculating Chapter 93A Damages: Takeaways from Diprio v. Ground Up Construction, Inc.
In Diprio v. Ground Up Constr., Inc., the Massachusetts Appeals Court considered the appropriateness of an award of attorneys’ fees to pro se litigants—homeowners who sued a contractor for violating a Massachusetts Home Improvement Contractor Statute (HICS)—and the proper measure of damages under 93A, Section 9. At trial, a jury found that (i) the plaintiff homeowners breached their home improvement contract and (ii) the contractor breached the HICS—each causing damages for the same amount and effectively “canceling out” the payment of damages. However, the trial court concluded that the contractor’s violation of the HICS violated Chapter 93A, Section 9 and awarded attorneys’ fees to the pro se homeowners.
The trial court’s attorney fee award focused on fees incurred before the pro se homeowners’ counsel withdrew from the case. However, as the award was based on a factual issue that had some record support, the Appeals Court did not vacate the award and factual finding that the fees were incurred “in connection with said action” as Section 9(4) requires.
As to damages, the Appeals Court disagreed with the homeowners’ assertion that the trial judge erred in ascertaining the base damages on which to calculate multiple damages under Section 9. According to the homeowners, the trial judge should have multiplied their damages using the total amount of the judgment entered and not using the single damages figure the jury determined. As the Appeals Court explained, however, the judgment amount included prejudgment interest and attorneys’ fees, which are not elements of damages under Section 9(4).
This case demonstrates that parties and counsel should consider each element of damages when seeking and defending against Chapter 93A claims to avoid improper multiplication of amounts that are not properly included in a multiple damages award. Specifically, when considering multiple damages, a court should calculate interest on the single damages award only (absent some claim that fees and costs should be damages), and then add the interest and fees to the single damages once they are multiplied. That way, interest and fees are not inappropriately inflated by a multiple damages finding.
Navigating Tariffs in Construction Contracts: Creative Strategies for Owners and Contractors
Introduction: Steering Through the Storm of Tariff Uncertainty
Tariffs on critical construction materials—steel, aluminum, lumber, and more—are roiling project budgets and schedules, leaving owners and contractors adrift in a sea of cost uncertainty. As tariff negotiations remain murky and unresolved, these financial headwinds are likely to persist, threatening the stability of ongoing and future projects. Yet, within this storm lies a chance to chart a steadier course. By embedding strategic, tariff-savvy provisions in construction contracts, owners and contractors can shield their projects from volatility and seize control of their financial destiny. This article explores creative strategies to address tariff challenges, empowering stakeholders to navigate uncertainty with confidence.
Strategic Contract Provisions to Mitigate Tariff Risks
Carefully crafted contract language is the cornerstone of managing tariff-related uncertainties. Below are innovative strategies to consider when negotiating and drafting construction agreements, designed to balance risk allocation and maintain project viability:
1. Incorporate Material Cost Escalation Provisions
Tailored material escalation clauses allow for adjustments to the contract sum when tariffs significantly increase material costs post-contract execution. Such a clause limits relief to tariffs enacted after the contract is signed, ensuring that only unforeseen regulatory changes trigger adjustments. This incentivizes contractors to lock in pricing early while protecting owners from absorbing pre-existing tariff burdens.
2. Require Fair and Timely Notice of Tariff Impacts
To prevent disputes over tariff-related claims, contracts should mandate prompt notification of tariff impacts. A sophisticated strategy is to require contractors to identify tariff-driven cost increases within a short window (e.g., 7-14 days) of a tariff’s enactment or application to a project. This “fair notice” provision ensures owners receive early warnings, enabling proactive budget adjustments or alternative sourcing strategies. Contractors benefit from clear timelines, reducing the risk of waived claims due to delayed reporting.
3. Embed Tariffs in Change Order Processes
Change orders are a natural mechanism for addressing tariff impacts. Consider explicitly including tariff-related cost increases within the definition of permissible change orders. Contracts can require contractors to submit detailed documentation—such as supplier invoices, tariff notices, or government regulations—to substantiate claims. This transparency builds trust and streamlines owner approval. For owners, consider setting a threshold for tariff-related change orders requiring owner approval, such as 5% of a subcontract’s value or a specific scope division. This balances flexibility with oversight, ensuring significant cost increases are vetted.
4. Cap Total Tariff Adjustments
To manage financial exposure, contracts can impose a cumulative cap on tariff-related cost adjustments, such as $500,000 across the project (excluding subcontractor errors or omissions). With this approach, owners gain predictability, while contractors retain a pathway for relief within reasonable limits. Also, considering pairing the cap with a shared savings clause, where cost savings from tariff reductions (e.g., repealed tariffs) are split between the parties, incentivizing collaboration.
Conclusion: Building Resilience Through Collaboration
Tariffs are an unavoidable reality in modern construction, but they need not derail projects. By integrating thoughtful, tariff-specific provisions into construction contracts, owners and contractors can manage risks collaboratively and creatively. From escalation clauses and fair notice requirements to change order thresholds and cost caps, these strategies empower stakeholders to navigate tariff uncertainties with confidence. Proactive contract drafting remains a powerful tool for ensuring project success in an unpredictable economic landscape.
Bad Formatting Dooms Proposal and GAO Bid Protest
In a cautionary decision that reinforces the importance of strict compliance with solicitation instructions, the Government Accountability Office (GAO) recently denied in part and dismissed in part a protest challenging a contractor’s elimination from a U.S. Department of Agriculture (USDA) procurement.
The recent case — FI Consulting, Inc. (FIC) — centers on a seemingly minor formatting error: the inclusion of a corporate logo with embedded text on the cover page of FIC’s quotation. While the protester argued this was a minor informality or the result of ambiguous solicitation language, the GAO disagreed, emphasizing that the USDA had clearly instructed vendors to exclude images containing text from their proposals — including logos.
The Solicitation’s Formatting Standards
Issued under Federal Acquisition Regulation (FAR) Subpart 8.4 procedures for a five-year blanket purchase agreement (BPA), the Request for Quotations (RFQ) contained strict formatting requirements, warning vendors that failure to follow instructions would be treated as a deficiency, rendering the quotation ineligible for award. Among those instructions: Images were permitted, but only if they did not include text. A Q&A exchange in the solicitation process reinforced this point, clarifying that branding elements, such as logos with text, were not allowed as images.
As stated in the RFQ instructions, the USDA’s justification for this seemingly picayune requirement was that “[t]he [vendor]’s attention to detail is important to the Government as a significant amount of work under the attached [performance work statement] will require the [vendor] to follow detailed instructions, including quality control.” The vendor’s attention to detail in preparing its quote was, thus, a proxy for the expected quality of its performance, as also stated in the RFQ: “The [vendor]’s quot[ation] represents the quality of the performance the Government can expect in the performance of work under this BPA.”
In this way, the USDA employed an approach similar to that reportedly used by the band Van Halen in the 1980s that used to demand that concert venues remove brown M&Ms as a way of telling whether those at the venue had closely read the contract, which included detailed stage set-up instructions.
Despite these warnings, FIC submitted a quotation with its logo — “FI CONSULTING” — as a picture containing text on the cover pages of all volumes. USDA deemed this a failure to follow the RFQ’s instructions and eliminated the proposal prior to full evaluation.
Protest Grounds and GAO’s Reasoning
FIC raised two primary arguments:
Latent Ambiguity – FIC contended that the formatting rules were ambiguous and that a reasonable interpretation would exempt company logos from the text-in-image prohibition.
Minor Informality – In the alternative, FIC argued that including a logo was a trivial error and should have been waived under FAR 14.405.
GAO rejected both claims.
No Ambiguity – GAO held that the RFQ was unambiguous. The instruction that “pictures may not contain text” was stated plainly and emphasized in bold. The agency’s response during the Q&A process further eliminated any uncertainty. The GAO found FIC’s interpretation unreasonable, especially in light of the numerous reminders that noncompliance would lead to elimination.
No Basis for Waiver – The GAO dismissed the second argument outright, noting that FAR 14.405 applies only to sealed bidding under FAR Part 14. Since this procurement was conducted under FAR Subpart 8.4, those procedures did not apply. Even if waiver were permissible, the GAO observed that the agency had the discretion not to waive the requirement — particularly where compliance was integral to the evaluation of vendor reliability.
Key Takeaways for Contractors
This case serves as a sobering reminder for government contractors: Pay close attention to solicitation instructions — down to the formatting requirements. FIC’s protest ultimately failed not due to its qualifications or pricing, but because of a technical violation — one that could have been avoided with a more careful reading of the solicitation.
As agencies continue to stress attention to detail in their solicitations, contractors would be well advised to treat every formatting instruction as a performance requirement. In this procurement landscape, form matters just as much as substance.
Spring 2025 Brings Changes to Minnesota Contractors’ State Affirmative Action Requirements
The Minnesota Department of Human Rights (MDHR) recently updated several documents on its website for Minnesota government contractors, including the workforce certificate application, affirmative action program template (now “Compliance Plan”), annual compliance report (ACR), ACR instructions, and nondiscrimination poster. These changes were presumably made to minimize conflict with President Donald Trump’s executive orders concerning affirmative action and diversity, equity, and inclusion (DEI) programs.
Quick Hits
MDHR has revised multiple compliance-related documents for Minnesota government contractors.
Key changes include new terminology, workforce certificate application form signature requirements, and more structured reporting periods for annual compliance reports.
An annual compliance report must be submitted to MDHR each year, even if the Minnesota contractor does not currently hold a state government contract.
Background
Companies contracting with Minnesota state departments and agencies, certain metropolitan agencies, and the University of Minnesota must obtain a workforce certificate of compliance from MDHR if they have a Minnesota government contract that exceeds $100,000 and they have at least forty full-time employees in Minnesota or in the state of their primary place of business. Contracts with Minnesota cities, counties, townships, and other political subdivisions must exceed $250,000. Workforce certificates are required whether the company’s primary place of business is inside or outside Minnesota.
To obtain a workforce certificate, a Minnesota contractor must complete the workforce certificate application form, submit a Minnesota-compliant compliance plan, including a workforce and utilization analysis (WUA) and availability and underutilization analysis (AUUA), and pay a $250 application fee. Once received, the workforce certificate is good for four years and is tied to the contractor, not to a particular contract. Therefore, Minnesota contractors are not required to obtain a new certificate for each state contract exceeding $100,000 or local government contract exceeding $250,000. Contractors receiving a workforce certificate must post MDHR’s nondiscrimination poster at all establishments covered by the workforce certificate.
Each year during the four-year certification period, contractors must submit an annual compliance report, which is due to MDHR on the certificate’s anniversary date. Failure to submit an acceptable ACR may result in revocation of the workforce certificate and the inability to enter into state government contracts until an acceptable ACR is submitted and certificate reinstatement is requested and granted by MDHR’s commissioner. State government contractors are also subject to compliance reviews by MDHR.
Changes to MDHR’s Workforce Certificate Application Form
MDHR’s workforce certificate application form was updated in March 2025 and no longer references the Office of Equity and Inclusion for Minnesota Businesses. It also deleted language that Minnesota contractors must work to ensure that Minnesota’s workforce reflects the state’s demographics and replaced it with a statement that companies must maintain a workforce free of discrimination under the Minnesota Human Rights Act (MHRA).
The application checklist notes that the previously entitled “Affirmative Action Plan” is now known as the “Compliance Plan.” Further, it is no longer necessary that the workforce certificate application form be signed by the contractor’s president, chief executive officer, or board chair.
The application now includes new and comprehensive “Good Faith Efforts Agreements,” including an agreement to take prompt corrective action concerning violations of state human rights laws. Finally, the data privacy notice clarifies what information submitted with the application is and is not made available to the public.
Changes to the Affirmative Action Plan Template
In April 2025, MDHR changed the name of its AAP template from “Affirmative Action Programs for People of Color, Women and Individuals with Disabilities” to “Compliance Plan.” Differences between the old and new templates include:
The compliance plan no longer includes the definitions of the terms used in the plan.
The following sections were eliminated: “Internal and External Dissemination of Affirmative Action Policy and Plan,” “Action-Oriented Programs,” and “Goals & Timetables.”
The compliance plan includes a new section entitled “Anti-Discrimination Policy.”
The “Assignment of Responsibility for Affirmative Action Program” was reworked and retitled, “Equal Employment Opportunity Official and Role.”
The compliance plan no longer includes references to affirmative action or affirmative action goals. These have been replaced with equal employment opportunity (EEO) objectives.
The compliance plan no longer includes references to the utilization of businesses owned by women, people of color, and individuals with disabilities. Nor are there any references to full employment of women, people of color, and individuals with disabilities.
Contractors may wish to consider the following tips for preparing the compliance plan:
adopting MDHR’s most recent template and limiting revisions to MDHR’s suggested language;
ensuring the EEO official included in the EEO policy statement matches the EEO official listed in the workforce certificate application and in the compliance plan narrative;
ensuring the EEO policy statement is signed by the president, CEO, or board chair for the legal entity seeking the workforce certificate; and
ensuring the WUA and AUUA include all employees of the legal entity seeking the workforce certificate, including the top official of the legal entity (CEO or president), or at a minimum, all employees in Minnesota and at the company’s headquarters, including the company’s top official (CEO or president).
Changes to the MDHR Poster
The name of the new poster issued in 2025 is “Our Commitment to a Workplace Free from Discrimination.” It includes a new protected category for local human rights commission activity. It no longer includes any reference to affirmative action or AAPs.
Changes to the Annual Compliance Report
An annual compliance report (ACR) must be submitted to MDHR each year, even if the Minnesota contractor holds no current state government contracts.
Although the ACR packet includes a revision date of March 2025, the reports included therein appear to be unchanged, and interestingly still permit contractors to report on nonbinary employees.
What did change are the instructions for the ACR, both those included in the “Instructions & Requirements” tab of the ACR packet and on MDHR’s website. Contractors are now required to use 2018 (instead of 2010) census data to complete the “Availability and Underutilization Analysis” (AUUA) report. The instructions for the ACR used to read, “To make sure the Report is submitted on time, you can use a reporting period timeframe that is not more than 2 months prior to your certification date.” Under this old version of the instructions, contractors with a certification date of February 6 could pick any date between December 6 and February 6 to end their twelve-month ACR reporting period.
The revised instructions clarify MDHR’s previously unpublished rule change and now state, “To allow you enough time to compile the required data, your report can either start one or two months before the date your report is due. Each report must have the same start and end dates. For example, if your Workforce Certificate was approved 6.15.2024, your first ACR is due 6.15.2025.” Your reporting period can only be: 5.15.2024 to 5.14.2025, or 4.15.2024 to 4.14.2025.
MDHR’s unannounced rule change caused problems for many Minnesota contractors that had already submitted one or more ACRs using a reporting period that was not an exact date match to their workforce certificate. As a result, many contractors were required to revise and resubmit previously filed ACRs for the new date match reporting period.
Contractors may wish to consider the following tips for filing ACRs:
checking the MDHR website to ensure the most recent ACR form and instructions are being used;
confirming that the “Total Employees – Beginning of Reporting” period matches “The Total Current Employees” from the prior year’s ACR—unless this is the first ACR under a new workforce certificate; and
confirming the ACR “balances” before submitting it to MDHR; i.e., Total Employees Beginning of Reporting Period + Total Hires – Employees Transferred Out + Employees Transferred In – Employees Terminated must = Total Current Employees.
If the ACR does not “balance,” it will be rejected.
Contractors may also want to consider the following:
using “Total Current Employees” to prepare the AUUA;
using the whole person test to determine underutilization of women and minorities in the AUUA;
confirming the completion of Section F of the AUUA listing the recruitment area and census/standard occupational classification (SOC) codes used for each job group; and
when preparing the narrative report of the company’s steps to increase the utilization of females and/or minorities for any job groups where they are underutilized per the AUUA, making sure to include additional or different steps from the prior year ACR narrative for continuing areas of underutilization.
The letter template is optional.
Conclusion
Minnesota takes its affirmative action requirements for state government contractors seriously, and MDHR’s compliance officers are sticklers for their rules. It is rare for a workforce certificate application and/or ACR to be approved without a request for revisions.
SHIPS for America Act Reintroduced in Congress
On April 30, Sens. Mark Kelly, D-Ariz., and Todd Young, R-Ind., and Reps. Trent Kelly, R-Miss., and John Garamendi, D-Calif., reintroduced the Shipbuilding and Harbor Infrastructure for Prosperity and Security (SHIPS) for America Act (the Act). Other cosponsors in the Senate include Sen. Lisa Murkowski, R-Alaska, and Sen. John Fetterman, D-Pa. In the Senate, the tax provisions of the Act will be introduced in a separate Building SHIPS in America Act. The press release announcing the reintroduction of the Act includes links to a section-by-section summary of the Act and to the full text of the Act itself.
As in the version that was introduced in the previous session of Congress, the Act establishes requirements and provides incentives designed to revitalize the United States as a maritime nation, with revisions that, among other things, reflect the findings of the US Trade Representative regarding China’s shipbuilding dominance and President Donald Trump’s Executive Order “Restoring America’s Maritime Dominance.”
A key provision of the original version that the Act retains is the creation of a White House-level position of Maritime Security Advisor, who in turn will lead an interagency Maritime Security Board tasked with making whole-of-government decisions to implement a national maritime strategy.
The Act continues to set an ambitious goal of expanding the US-flag international fleet by 250 ships in 10 years in order to facilitate the development of a fleet of commercially operated, US-flag, American-crewed, and domestically built merchant vessels that can operate competitively in international commerce.
In line with the President’s Executive Order, the Act retains provisions to establish a Maritime Security Trust Fund to reinvest duties and fees paid by the maritime industry into maritime security programs and infrastructure supporting maritime commerce.
Running 341 pages in its official printed format, the Act brings forward many other specific legislative proposals that were in its original version, including measures for regulatory reform, increased cargo preference requirements, financial incentives to expand shipyard capacity, support for innovations in maritime technology, and investments in maritime workforce education and career development. These proposals will no doubt receive detailed analysis, discussion, and debate in the days ahead. In order for some elements of the Act to be enacted more quickly, they might be separated out and incorporated into other pieces of legislation, such as the National Defense Authorization Act that is typically passed each year.
As before, the Act enjoys not only bipartisan support in Congress but also strong support from stakeholders throughout the maritime industry, with initial endorsements from nearly 70 vessel operators, labor unions, port authorities, and industry groups. With the President’s pledge to support US shipbuilding in his joint address to Congress in March, the subsequent creation of the Maritime Directorate in the White House, the President’s issuance in April of an Executive Order to restore America’s maritime dominance, and now the bipartisan and bicameral reintroduction in Congress of the SHIPS for America Act, the maritime industry is enjoying more attention in Washington than it has received at any time in more than half a century.
An Update on the DEI Certification Provision of Executive Order 14173
On May 2, 2025, the United States District Court for the District of Columbia denied Plaintiffs’ Motion for a Preliminary Injunction in National Urban League et al. v. Trump, et al., 25-471, a case that seeks to halt enforcement of President Trump’s executive orders (“EOs”) related to diversity, equity, and inclusion (“DEI”), EO 14151 and EO 14173, as well as EO 14168, regarding so-called “Gender Ideology.” At this point two tribunals have ruled that the DEI-related EOs should not be enjoined pending legal challenges. (The other tribunal to take this position is the U.S. Court of Appeals for the Fourth Circuit which stayed a nationwide preliminary injunction of the DEI-related EOs issued by the District Court of Maryland.)
Government contractors are particularly interested in the DEI Certification provision in Section 3(b)(iv)(A) and (B) of EO 14173, which requires each agency of the government to include two terms in every contract or grant award: one requiring the counterparty “to certify that it does not operate any programs promoting DEI that violate any applicable Federal antidiscrimination laws,” and another requiring it to agree that compliance with those laws “is material to the government’s payment decisions for purposes of” the False Claims Act (“FCA”), 31 U.S.C. § 3729(b)(4). (We have previously done a deep dive on FCA liability premised on DEI programs.)
District Court: The DEI Certification Is Not Unconstitutionally Vague, Does Not Chill Protected Speech
The Court addressed Plaintiffs’ fear that the Trump administration will take a novel and overly broad view of “illegal discrimination” that will expose them to liability for DEI initiatives that are lawful under current judicial precedent but which the government might nevertheless target under existing antidiscrimination law. The Court said that this is “a concern with the interpretation of underlying antidiscrimination law—which Plaintiffs do not challenge—rather than the Certification Provision.” The Court said that an entity whose DEI program the government targets can, at that time, “contest whether their DEI programs fall within the scope” of applicable antidiscrimination laws.
The Court also stated that the DEI Certification provision does not chill protected speech because it only targets DEI programs that violate federal antidiscrimination law, and there is no First Amendment right to “operate such programs.” Thus, the Court aligned with the Fourth Circuit, which also noted that EO 14173 does not purport to establish the illegality of all efforts to advance DEI, only illegal efforts to advance DEI. In response to the argument that no one knows what illegal DEI means, the judge stated that the First Amendment does not require the government to preemptively identify programs or provide hypothetical examples of action that violates antidiscrimination law. In reaching this conclusion, the Court stated that it “respectfully disagrees” with the Northern District of Illinois which, in Chicago Women in Trades v. Trump et al., 1:25-cv-02005, partially granted a preliminary injunction and in so doing “faulted” EO 14173’s DEI Certification requirement for not clarifying “what might make any given DEI program violate Federal antidiscrimination laws.”
As for what it means to “promote” illegal DEI, the District Court for the District of Columbia simply looked to the Merriam-Webster dictionary, which clarifies that “[t]o ‘promote’ something is to contribute to its growth or prosperity.”
District Court: Good Faith Compliance with Antidiscrimination Law Diminishes FCA Risk
Given the potential for treble damages and civil penalties under the FCA, contractors and grantees are particularly concerned about the concession of materiality required by the DEI Certification. Plaintiffs argued that signing the DEI Certification could expose them to significant FCA liability for minor or technical violations, especially given that the government appears poised to adopt an aggressive and broad view of what counts as illegal discrimination.
The judge viewed this risk with skepticism. He pointed to the FCA’s scienter requirement, under which liability only attaches if a defendant submitting a false claim acted with knowledge, deliberate ignorance, or reckless disregard of the falsity of the claim. The Court specifically stated: “The False Claims Act…does not create liability for good-faith but mistaken beliefs that DEI programs comply with Federal law.” (Notably, this is the result we reached in our earlier analysis of this issue: “Where contractors are required already to comply with federal anti-discrimination laws, it seems likely that they hold a good faith belief that their DEI programs are consistent with, and not contrary, to those laws. We expect that the government will face significant hurdles in proving that contractors ‘knowingly’ engaged in ‘illegal’ DEI programs.”)
Key Takeaways for Federal Contractors
Expect to See the DEI Certification:
At the moment, only the Department of Labor is enjoined from asking its contractors and grantees to sign the DEI Certification requirement.
Confer with Counsel:
It is a good idea to confer with counsel about how to respond to the DEI Certification, particularly given that the certification language is not standard and can be customized by Contracting Officers.
DEI Programs Are Not Per Se Illegal:
Even in decisions denying relief to plaintiffs, courts are making clear that not all DEI programs and not all efforts to promote diversity are illegal. Signing the DEI Certification does not compel an entity to end all DEI activities—the certification only targets DEI efforts that are already illegal under existing, applicable antidiscrimination law.
Good Faith:
Contractors and grantees that act in good faith and have a good faith belief that their DEI programs comply with applicable antidiscrimination law may avoid liability under the FCA.
Conduct a Privileged Review of All Existing DEI Programs:
The DEI Certification covers all DEI programs that an entity operates, even those outside of an entity’s federally funded programs. Therefore, now is a good time for a comprehensive, privileged review of DEI programs to ensure they comport with current anti-discrimination laws. Evaluating these programs through the more critical lens of the current administration can identify any aspects that should be amended to mitigate misunderstanding and risk. This review can also help establish good faith belief in the truthfulness of the DEI certification.
EEO-1 Reporting (Maybe) — Get Ready Nonetheless!!
On April 15, 2025, the Equal Employment Opportunity Commission (EEOC) sought approval of its 2024 EEO-1 Component 1 data collection. The EEOC’s new proposed 2024 EEO Component 1 Instruction Booklet (the “Booklet”) changes some reporting obligations for employers. If approved, employers will have from May 20, 2025, to June 24, 2025, to file their reports. Private employers with at least 100 employees must file the EEO-1 report annually. In addition, federal government contractors with 50 employees previously were required to file EEO-1 reports. What is less clear is whether government contractors with less than 100 employees will have to file their EEO-1 report. The EEOC’s proposed Instruction Booklet still requires federal contractors to file. The Booklet does not address whether President Trump’s Executive Order 14173, eliminating Executive Order 11246, changes these reporting obligations.
One major proposed change to the EEO-1 report is the removal of the option for employers to report employees who identify as nonbinary. Employers previously could report nonbinary employees in a separate comment box. If approved, that option would not be available. The instruction booklet does not require employers to collect or report pay data.
Next Steps
We will monitor whether the 2024 Instruction Booklet is approved. In the meantime, employers should collect data by employee job category, as well as by sex and race/ethnicity, now so they are ready to report in May or June.