Defense Base Act Workmans Compensation
Legal Resources
Despite being inadequate, the Defense Base Act was intended to benefit
the overseas US Government funded contract worker.
In addition to taking away some of your most basic rights the DBA is now
being "interpreted" by insurance companies, their defense lawyers and
some judges to delay and deny benefits.
Is your lawyer working in your best interest or just going along with this?
A person including, but not limited to, an employer, his duly authorized agent, or an employee of an insurance carrier who knowingly and willfully makes a false statement or representation for the purpose of reducing, denying, or terminating benefits to an injured employee, or his dependents pursuant to section 9 [33 USC § 909] if the injury results in death, shall be punished by a fine not to exceed $ 10,000, by imprisonment not to exceed five years, or by both.
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Contractors on the Battlefield: Special Legal Challenges
By Rand L. Allen and William A. Roberts, III
April 2, 2003
The role of federal contractors has been expanding in the areas of front-line and near front-line
support for the United States military and other government agencies. Both the war with Iraq and
the ongoing war on terrorism have increased the demand for the services of contractors in so-
called "hot zones," areas in which military activities are either impending or ongoing. In addition,
certain contracts that support defense activities may be impacted by increased demand and
priority considerations, as well as heightened security restrictions that may cause interference
with contract performance. The Government Contracts Practice of Wiley Rein & Fielding LLP
represents a large number of federal contractors who have faced many of the unique
challenges posed by their expanding roles when providing support to their U.S. customers. Our
practice draws on its broad expertise in advising and representing clients in a wide variety of
contracting experiences, as well as our significant contacts and relationships with government
agencies and officials. This summary discusses some of the special contracting issues and
challenges for government contractors whose employees work in these areas.
I. Compensation for Employee Injury, Detention or Death
The Defense Base Act ("DBA") and War Hazards Compensation Act ("WHCA") extend workers’
compensation for employees who are injured, captured or killed while working overseas on
certain federal contracts. Contractors may recover the costs of insurance premiums as an
expense under contracts, and contractors or their insurers may receive direct reimbursement for
certain other payments to employees. Contractors should consult with their insurance carriers to
determine the coverage needed, and whether any anticipated activities void coverage under
existing policies.
As a preliminary matter, insurance carriers are prohibited by law from providing coverage for
business operations in any country against which the United States has sanctions. Therefore,
although the DBA and WHCA would normally cover contractor activities in war situations, the
current sanctions against Iraq require contractors to take additional actions to ensure coverage
of employees. Certain exemptions under applicable laws may apply to authorize waiver of the
prohibition against coverage. In addition, the Department of Treasury’s Office of Foreign Asset
Control may grant a license for transactions and assets for activities in countries and areas
under sanctions. If either a proper exemption is determined or a license is granted, insurance
companies may provide coverage. The Office of Foreign Asset Control recommends contacting
contracting officers for assistance in determining exemptions or coordinating applications for
licenses.
A. The Defense Base Act
The DBA requires contractors to provide workers’ compensation coverage to employees working
on certain overseas contracts. The DBA effectively extends coverage of the Longshoreman’s
and Harbor Workers Compensation Act and thereby provides coverage under the substantive
rules of workers’ compensation.
Compensation is available to the families of covered employees who are injured or killed during
the course of the employee’s work under a DBA-covered contract. The DBA also provides
coverage when an employee is injured or killed during travel to or from the place of employment
when the contractor or government provides for the cost of transportation. A contract subject to
the DBA must include the clause at Federal Acquisition Regulation ("FAR") § 52.228-3.
B. The War Hazards Compensation Act
The WHCA expands coverage of the DBA to provide coverage for war-related hazards, such as
injury, death or capture resulting from combat. Whereas the DBA covers injuries sustained only
during the course of an employee’s performance of duties, the WHCA covers injuries sustained
while present in a combat zone, whether or not the employee was engaged in the performance
of the contract. In essence, the WHCA extends 24-hour, 7 days a week coverage to employees
who are subject to war-hazards risks. The WHCA broadly defines "war risk hazards" and is not
limited to actual declarations of war.
Employees and/or their families may receive compensation for injuries, capture and detention,
or death, including funeral and burial expenses, medical/hospital care, or other necessary care
when the employee is working under a federal contract. The WHCA also provides for
compensation if an employee is captured or reasonably believed captured by hostile forces, or
not returned to home or place of employment due to failure of the contractor or the government.
II. Status of Forces on the Battlefield
Because the Department of Defense ("DoD") has not provided contractors with uniform
guidance regarding contractors in combat, the status of contractor employees is not entirely
clear. The role and status of contractors under international law, particularly the Geneva
Convention, is also not clear. The DoD’s Doctrine for Logistic Support of Joint Operations
(2000) provides some guidance regarding contractor roles.
Status of Forces ("SOF") Agreements define the legal status of members of U.S. forces
stationed or deployed within another nation and are typically entered into prior to military action.
Generally, SOF Agreements do not address contractor personnel. If a SOF Agreement does not
address the status of contractors, employees are subject to the laws of the nation in which they
are working.
Contractors accompanying military forces during wartime are defined under the Geneva
Convention as non-combatants. They are therefore accorded prisoner of war status and
protections if captured. The DoD recommends that contractors be issued identity cards stating
their status under the Geneva Convention (the Geneva Conventions Identity Card). Also, in the
event of a formal declaration of war by Congress, an employee accompanying U.S. forces would
become subject to the Uniform Military Justice Act.
Some contractors have recently indicated that their employees are either being permitted or
required to carry arms when working in potential combat areas. Such actions may present a
special problem for contractors because they may conflict with the employees’ ordinary non-
combatant status, even in the event that the weapon is carried for self-defense. An employee
who carries arms might lose his or her non-combatant status and protections because he or she
could be considered neither a noncombatant nor a sanctioned combatant under the U.S. armed
forces - thereby no longer meriting prisoner of war status. Furthermore, some commentators
have suggested that a contractor’s support for or even presence near a weapon or weapons
system may make the contractor and its employees subject to direct attack under the provisions
of international law. These issues should be raised with contracting officers for clarification with
regard to the Identity Card and the particular SOF agreement under which the U.S. military
forces operate and in the theater where the employees will provide support.
III. Safety and Force Protection Provisions for Contractor Personnel
Because the DoD has not issued uniform guidance regarding safety and protection provisions
for contractor employees, contractors should also actively engage their contracting officers
regarding issues such as: (1) availability of facilities and transport for medical needs and
emergencies, (2) evacuation and extraction plans and provisions for dangerous situations, (3)
and extra equipment and training for special needs such as chemical or biological warfare
protection.
The Antiterrorism/Force Protection Policy for Defense Contractors Outside the U.S. clause at
DoD Federal Acquisition Regulation Supplement ("DFARS") 252.225-7043 requires contractors
to obtain information necessary to ensure the safety of contractor personnel. The clause itself
does not specify particular protections or guarantees available to contractors, but directs
contractors to seek out information. Contractors are required to contact the Department of State’
s Overseas Security Advisory Council and inform the United States embassy of the presence of
employees. Contractors must also obtain and provide employees with force protection
awareness information "commensurate" with that provided to DoD civilian and military personnel
and to ensure compliance with existing polices regarding force protection for contractors.
IV. Pay Incentives for Contractor Employees in Dangerous Areas
Contractors working in certain designated areas of danger may be entitled to additional "danger
pay" premiums that recognize the significant hardship and risks of physical injury imposed by
employment in those areas. Certain premiums may also be paid for contract work in areas that
are determined to warrant a "post hardship differential allowance" based on differences in
conditions in those areas as compared to the United States. The Department of State issues
and updates guidance for government personnel regarding the classification of danger pay and
hardship post allowances, as well as the levels of pay premiums authorized above basic
compensation levels, which range from 5-25% for each category, with the total not to exceed
50%. Generally, these additional contract costs are allowable and may be passed on to the
government. The FAR, however, counsels that advanced agreement and coordination with the
contracting officer are strongly encouraged, to verify the allowability of these costs. See, e.g.,
FAR §§ 31.109, 31.205-6.
V. Potential Defenses to Contractor Liability
Increased risk may be involved with battlefield support activities, in the form of harm to
employees, other contractor employees, U.S. or allied military forces, and other non-combatant
parties. For example, a contractor might be sued when an employee who is issued a side arm
accidentally shoots an employee of another contractor. If a claim is brought against a contractor
arising from the activities of the contractor and its employees on the battlefield, the following
defenses may be available.
A. Government Contractor Defense
The Government Contractor Defense may be available as a defense against liability for a
contractor’s or its employee’s actions to the extent that the employee was acting within the
scope of a government contract. Although the defense was first raised in the context of a
contractor’s liability for a manufacturing defect, courts have held that the defense applies to
service contracting as well. The three-part test for this defense, as applied to service
contractors, generally requires the following: (1) the contractor must have acted at the direction
of government officials acting in their official discretionary capacity; (2) the government must
have approved reasonably precise performance specifications or duties in the contract, and the
contractor must have performed according to those specifications or duties; and (3) the
contractor must have warned the government of all dangers in the performance of those
specifications or duties known to the contractor and not known to the government.
B. Extraordinary Contractual Relief
Public Law 85-804 provides for possible relief to contractors under circumstances where they
are not otherwise entitled to it. As the name implies, relief is rarely granted, and only in
extraordinary conditions. The contract clause at FAR § 52.250 provides indemnification for
"unusually hazardous activities." Unlike the typical 84-805 request, which seeks after-the-fact
compensation or reimbursement for costs or liabilities, this clause provides for prospective
indemnification of a contractor whose employees are in engaged in activities that pose unusual
risks to themselves or others. The clause does not define "unusually hazardous activities," which
means that contractors should take care to define the anticipated scope of hazards for which
indemnification is provided. This clause, however, is an extraordinary grant of immunity, and will
not likely be agreed to by the government, absent very compelling circumstances.
VI. Extended Military Leave Benefits
In October of 2001, the DoD issued a memorandum concerning the allowability of costs for
additional fringe benefits paid by contractors to employees who are called up for reserve military
duty in the National Guard and Armed Forces Reserve. The memorandum noted that, in the
past, many employers continued to provide fringe benefits such as health care and/or pay the
differential between employees’ salaries and their military duty salaries. The DoD stated that it
encouraged and applauded the provision of such benefits, and clarified that such costs were
allowable as contract costs under FAR Part 31 cost provisions.
VII. Government Restriction of Access to Contract Sites
The heightened level of security at government facilities during the war and/or elevated terror
risk levels has created the potential for government interference with contract performance. An
emerging issue for some contractors has been the restriction of access by the government to
facilities or property where the work is performed. In effect, contractors have discovered that
their employees are barred by the government from the worksite. Some contractors have been
informed that all access to government facilities or property is restricted for security reasons.
Other contractors have been told that particular employees are henceforth considered "non-
essential," and therefore restricted from access, while other employees will be allowed access
and may continue their work.
Depending on the type of contract, the government’s action could be deemed a constructive
partial suspension or stop work or a constructive partial termination, for which the contractor
may be entitled to an equitable adjustment on the contract price or other contract terms.
Contractors may be able to recover for stand-by labor and related overhead, retention of key
personnel, severance payments, recruiting costs to replace staff after work is allowed to resume,
idle or underutilized equipment, demobilization and remobilization of work teams, material and
labor escalation costs, losses of efficiency, unabsorbed overhead, increased subcontractor
costs, profits on costs incurred, and equitable adjustment preparation costs.
At a minimum, contractors should establish communications with their contracting officer as early
as possible to ensure that the government is apprised of any restrictions on the contractor’s
ability to perform the contract. Dialogue with the government will help ensure the
reasonableness of contractors’ actions and required efforts to mitigate losses during the
restrictions. Contractors should also keep detailed records of their communications with the
government, and their activities concerning idled employees and resources, including efforts to
mitigate the costs of having them on stand-by. Because a request for an equitable adjustment
requires a written claim, adequate documentation is essential to a contractor’s recovery.
VIII. Defense Priorities and Allocations System
The Defense Priorities and Allocations System ("DPAS") allows the president to declare that
certain contracts be given priority when necessary to promote the national defense. The DPAS,
which is administered by the Department of Commerce, allows the government to issue "rated
orders" that identify critical items and establish a hierarchy of priority for their production. A
contractor who receives a rated order must give that order priority over lower-rated orders, and
all non-rated orders. A contractor who is able to fill a rated order must do so, regardless of the
impact it may have on the non-rated or lower-rated orders of government or commercial sector
clients. Contractors must be aware of the potential for receiving rated orders, and must
understand their obligations to accept them. Contractors should also become familiar with the
limited circumstances under which they may, and sometimes must, reject rated orders. Special
provisions of the DPAS also grant immunity from civil actions to contractors who accept rated
orders.
IX. Conclusion
Although contractor employees face heightened risks when working overseas, a number of
protections are available to them. Increased contractor costs may be reimbursed by the
government, and certain liabilities may be avoided as a result of the government-contractor
relationship. Because many of these issues are not well defined, care should be taken to
address potential problems in advance through increased and well-informed dialogue with
contracting officials and insurance carriers, and by securing inclusion of appropriate FAR and
DFARS contract clauses.
For more information, please contact Rand L. Allen at 202.719.7329 or rallen@wileyrein.com
and William A. Roberts, III at 202.719.4955 or wroberts@wileyrein.com.
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