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Paid Administrative Leave - Allowable?


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A contract employee is placed on paid administrative leave pending the outcome of an investigation. I was asked whether the compensation continued as allowable under FAR 31. I appreciate the assist.

I'm having a hard time understanding the situation. How does a contract employee get put on government paid admin leave? How does Part 31 come into play? Does it involve the employee's employer's contract? What else does that contract say?

Based on your initial input, I would hazard a very speculative guess that the cost incurred by the contractor in paying the employee is allowable right now. But it may turn out that the investigation leads to a conclusion that some or all of the employee's labor charges are unallowable, because there is some sort of violation involved. But we don't know that yet. So I would guess you keep paying the contractor so long as its employee is on admin leave "pending the outcome of an investigation."

Admin leave ... for a contractor employee? What am I missing here?

Oh well, I'm sure somebody will set me straight soon enough.

Until then, hope this helps.

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Good question. Is the administrative leave with pay the result of a collective bargaining agreement or plainly called for by a written company policy? If not, how is leave in furtherance of the investigation? Is this a discrimination or harassment allegation (where separation of the complainant from the alleged wrongdoer might be appropriate during the pendency of the investigation)? Can temporary reassignment meet the need? How would the federal government handle it if it were its own employee? (See the recent allowability decision involving administrative leave surrounding Hurricane Katrina.)

Allowability may likely depend on the nature of the allegations underlying the employment dispute or investigation. Is the allegation that the employee took kickbacks? If so, paying the employee to sit at home is probably not allowable. Consider as research starting points Geren v. Tecom, Inc., 566 F.3d 1037 (Fed. Cir. 2009), discussed in 51 Gov't Contractor ? 190 & Karen L. Manos, Allowability of Legal Costs, 05-05 Briefing Papers 1 (April 2005).

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Allowability may likely depend on the nature of the allegations underlying the employment dispute or investigation. Is the allegation that the employee took kickbacks? If so, paying the employee to sit at home is probably not allowable. Consider as research starting points Geren v. Tecom, Inc., 566 F.3d 1037 (Fed. Cir. 2009), discussed in 51 Gov't Contractor ? 190 & Karen L. Manos, Allowability of Legal Costs, 05-05 Briefing Papers 1 (April 2005).

Jacques,

As you may know -- but others may not -- the Tecom case addressed the allowability of a contractor's settlement of a legal matter. It did not address the allowability of legal expenses per se, nor did it address the allowability of labor hours/employee compensation incurred and/or paid during an investigation.

Just to clarify. Hope this helps.

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Guest Vern Edwards
A contract employee is placed on paid administrative leave pending the outcome of an investigation. I was asked whether the compensation continued as allowable under FAR 31. I appreciate the assist.

Your question is so vague it is ridiculous.

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Jacques,

As you may know -- but others may not -- the Tecom case addressed the allowability of a contractor's settlement of a legal matter. It did not address the allowability of legal expenses per se, nor did it address the allowability of labor hours/employee compensation incurred and/or paid during an investigation.

Just to clarify. Hope this helps.

I don't know what the best analogy is. Is it to backpay (my current favorite) (See Cibinic & Nash, Cost-Reimburseable Contracting (3d Ed. 2004), at 862)? Severance pay (maybe)? Idle time (unlikely)? Litigation under FAR 31.205-47, where "proceeding" is defined to include "investigation" (possibly)?

Whatever the correct answer ends up being, I would offer that now (during an ongoing investigation) is probably not the right time to make an allowability decision.

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Guest Vern Edwards

I see no reason to postpone an allowability decision.

Something has happened. A contractor employee is involved in an investigation in some way. Pending the outcome of the investigation, the contractor has sent the employee home, perhaps at government direction. The employee is no longer doing contract work, but the contractor has decided to continue paying his salary, for whatever reason.

The salary paid during the employee's "administrative leave" is not allowable as a direct cost, because the employee is not doing any contract work. At best, the salary is allowable only as an indirect cost, assuming that it conforms to the contractor's employment policies and/or a labor-management agreement. See FAR 31.201. As contracting officer, I would disallow the salary as a direct cost. As for allowability as an indirect cost, I would seek the advice of DCAA or my agency audit organization.

That would be my decision as contracting officer. The contractor can submit a claim if it thinks I'm wrong and ask for a final decision.

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Yes, Vern, I wish I had more information provided to me about the issue. Unfortunately, HR has closely held much of the detail to protect the privacy of the individual. The individual is a prime contractor employee. So, what I asked is as good as it gets. If you can't answer because there is not enough information to go on, so be it. However, comments such as yours doesn't really help matters. Nonetheless, I have long respected your opinions.

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Guest Vern Edwards

You could have said: Our contractor told one of its employees to stay home pending the outcome of an investigation. They continue to pay the employee's salary while he is at home. Is the salary paid to the employee while at home properly chargeable to the contract?

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You could have said: Our contractor told one of its employees to stay home pending the outcome of an investigation. They continue to pay the employee's salary while he is at home. Is the salary paid to the employee while at home properly chargeable to the contract?

I don't have a problem with any of Vern's replies on this thread. To the latest one, quoted above, I would reword as follows--

Our contractor told one of its employees to stay home pending the outcome of an investigation. They continue to pay the employee's salary while he is at home.

1. Are those continuing labor costs allocable to my contract as a direct cost?

2. If so, are such costs allowable and should I approve the contractor's invoice for payment? Or should I disallow those costs?

3. Are those costs allocable to my contract as indirect costs? How can I find out if the contractor should treat the costs as direct or indirect?

4. If indirect, are such costs allowable? How would I find out? What should I be looking at to make the proper determination?

5. What is the role of my auditors in this issue? What is the role of my Administrative Contracting Officer? Am I on my own, or do I have resources who might be able to help me?

Hope this helps.

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  • 4 weeks later...
Guest Vern Edwards
Wow. Another question posted on Wifcon that gets beat around and never answered. What a surprise.

To answer your question: Sure it's allowable, but it isn't allocable, so don't pay it.

Wrong. If it isn't allocable, then it isn't allowable. Allocability is one of the five tests for allowability. See FAR 31.201-2(a).

Wow. Another anonymous newcomer giving bad answers.

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