allowed to possess 30 grams of flower, 5 grams of concentrates, and 500 mg THC of edibles, non-Illinois residents are allowed half. Retail tax is 10% on flower, 20% on edibles, and 25% on concentrates. Moreover, CRTA also targeted criminal justice reform for minor violations, including the expungement of 700,000 records in violation of the Cannabis Control Act.
Employee Use of Cannabis: Employers cannot refuse to hire, discharge, or disadvantage an individual in regards to compensation, conditions, or privileges of employment for non-working and non-call hour use of marijuana. (§ 900-50(a)). An employee is not on call unless they were provided 24-hours’ notice by their employer. (§ 900-50(a)). Federally regulated employers are not included under this exemption for marijuana is still illegal at the federal level. (§ 10-50(a)).
Not to be overlooked, however, is the CRTA’s specific language that employers are not required “to permit an employee to be under the influence of or use cannabis in the employer’s workplace or while performing the employee’s job duties or while on call.” (§ 10-50(a)).
Employment & Workplace Policies: If applied in a nondiscriminatory manner, employers are not prohibited in enforcing “reasonable zero tolerance or drug free workplace policies, or employment policies concerning drug testing, smoking, consumption, storage, or use of cannabis in the workplace or while on call.” (§ 10- 50(a)). Furthermore, nothing in CRTA limits or prevents an employer from disciplining or terminating an employee from an employment policy or workplace drug policy violation. (§ 10-50(a)). CRTA makes no mention of workers’ compensation policies or changes in that arena.
An employer may consider an employee to be impaired or under the influence if the employer has “a good faith belief that an employee manifests specific, articulable symptoms while working that decrease or lessen the employee’s performance.” (§ 10-50(d)). Such symptoms of impairment include speech or physical dexterity, carelessness or negligence in operating machinery or equipment, and the disregard for the safety of oneself or others. (§ 10-50(d)).
Nonetheless, CRTA does not establish when disciplinary action against employees can be taken if symptoms of impairment are noted or what level of proof of impairment is required. Still, employees must be given a “reasonable opportunity to contest” the employer’s good faith belief in the employee’s impairment. (§ 10-50(d)).
However, CRTA offers no definition of “reasonable opportunity.” (§ 10-50(d)).
Next Step for Illinois Employers: In light of the passage and implementation of CRTA, Illinois employers can benefit from (1) Reviewing and updating testing and drug-use policies with specific guidelines for impairment; (2) Creating and documenting symptoms of job impairment, workplace misconduct, disregard of workplace safety; and (3) Forgoing discharge or discipline of employees until the employee has showcased impairment signs and has been given a chance to respond.
As it goes into effect, the new law still leaves a lot of questions with regards to implementation, regulation, and the effect on some specific areas of law. For example, as written, the law singularly fails to address workers’ compensation benefits and the associated implications of the same.
If you have any questions or specific areas of concern while all the changes are being implemented, please remember we have a Cannabis Law Practice Group here to help. Feel free to direct questions or concerns to [email protected] or call us at (312)566-0040.
What’s the Buzz
Within 24 hours of legalization taking
Tell us what you would like to
read about...
effect, Illinois saw sales of cannabis
products topping $3.1 million dollars. The
first month of sales is estimated to total
$39.2 million dollars despite a supply
shortage.
The law is going to be ever evolving in
the upcoming days to deal with the
ramifications of this new legislation which
is meant to be a model for all the states
going forward.
Our goal is to create a newsletter that is
not just informative but also useful to the
people who read it. We would love your
input and suggestions for any topics or
questions you would find helpful and
would love to see in the future!
Feel free to email us at
[email protected] or give us a call
anytime at (312) 566-0040
Best regards,
Carol A. Cesaretti
Managing Partner and General Counsel; Chicago
Director of the National Medicare Compliance, Workers' Compensation Group, and Cannabis Law Practice Group
Michael J. Scully
Managing Partner of the Workers' Compensation Group and Cannabis Law Practice Group; Chicago
Julie M. Schum
Senior Associate, Practice Chair of the Cannabis Law Practice Group; Chicago Michael B. Cohen
Partner, Vice Chair of the DRI Cannabis Law Seminar Program Committee, Board Member Cannabis Law Practice Group; Chicago
Anthony Schumann
Partner, Government Enforcement & Corporate Internal Investigations Practice Chair, Board Member Cannabis Law Practice Group; Chicago
Joan Lebow
Partner, Healthcare Regulatory and Technology Practice Chair, Board Member Cannabis Law Practice Group; Chicago
Joseph Krcmar
Partner, Board Member Cannabis Law Practice Group; Chicago The Cannabis Law Practice Group
Quintairos, Prieto, Wood & Boyer, P.A.
This Quintairos, Prieto, Wood & Boyer P.A. (QPWB) Workers' Compensation Newsletter is issued for informational purposes only and is not intended to be construed or used as general legal advice. Please contact the author(s) or your contact at QPWB if you have questions regarding the currency of this information. The hiring of a lawyer is an important decision. Before you decide, ask for written information about the lawyer's legal qualifications and experience.
EXHIBIT
Chicago
Department
of Aviation
CODE
OF CONDUCT
Mayor Lori E. Lightfoot
City of Chicago
Jamie L. Rhee, Commissioner
Chicago Department of Aviation
January 2020
The Chicago Department of Aviation (CDA) serves a vital role in the global economy as one of the busiest airport systems in the world. It is comprised of O’Hare and Midway International Airports which serve more than 100 million passengers each year and more than 260 locations via 50 different commercial carriers to 46 countries. The airports are self-sustaining and collectively generate an estimated $60 million in annual economic activity for the region.
As a global leader for air cargo activity, the O’Hare 21 vision requires a bolder, bigger and more connected O’Hare in order to keep Chicago competitive in today’s fast growing commercial aviation industry. Our $8.5 billion terminal expansion program will transform O’Hare with new facilities and gates to increase its connectivity, efficiency and capacity.However, in order for CDA to successfully achieve these significant goals, CDA employees, contractors and their subcontractors must work together and do their best work.
In doing so, CDA is committed to the highest standards of trust, ethics and responsibility by all of our employees and vendors in all of our actions and relationships. Each day, we make important decisions that influence our chances of success. The wrong choice – even if it is taken in the heat of the moment or made with the best of intentions, can have significant, long-term effects on our success and reputation.
This Code of Conduct reflects CDA’s strong commitment to high professional and business standards and right conduct by our employees and vendors. It is the central guide regarding our core values, vision and standards of conduct, to assure that all employees and CDA vendors perform their work and conduct business with honesty and integrity. The Code of Conduct is intended to help our employees, vendors and other City stakeholders to learn or better understand the legal and ethical policies that govern their decision-making on a daily basis. It is also intended to help prevent our employees and vendors from violating City laws and regulations by providing a clear and simple list of actions that are appropriate and expected of them.
As you know, the Code of Conduct cannot cover every possible situation, but it provides the basic legal guidelines and essential ethical behavioral standards that will help us make the right decisions. It is our hope that the Code of Conduct will help foster an environment of trust and ethical behavior, as well as, greater diversity and inclusion, by our employees and vendors - particularly small, disadvantaged, minority, women and veteran-owned business enterprises.
We all need to be diligent and committed to reporting any concerns or violations of the Code of Conduct as soon as they arise – without exception. We will not accept any negative actions against employees or vendors who raise legitimate compliance concerns in good faith. Each of us has an obligation to act in accordance with this Code of Conduct. If there are times when we are uncertain what to do, it is our duty to promptly ask for guidance.
Public service is a public trust. We must all make the Code of Conduct a vital part of our work and in everything we do for the City of Chicago. Thank you.
Commissioner Jamie L. Rhee
Chicago Department of Aviation
CDA Code of Conduct | 2
Mayor Lori E. Lightfoot
City of Chicago
Mayor Lightfoot
Commissioner Rhee
MORE INFORMATION CDA Code of Conduct | 4 CDA Code of Conduct | 3 CDA Core
Mission
The CDA’s core mission is to: ensure safe and
efficient travel through O’Hare and Midway International Airports; enhance economic activity and job creation within the City of Chicago and
the region; continue to grow Chicago’s airports’
competitive positions in the global aviation
marketplace; provide world class services and
amenities in an environment that reflects Chicago’s rich, diverse and unique character; and continue to be the international leader in airport
sustainability by integrating environmental best
practices into all aspects of the airports. In order
for CDA to continue to fulfill its core mission and
achieve its goals in connection to our $8.5 billion
terminal expansion program, all of our employees and vendors must be fully committed to high professional and business standards.
I. ETHICAL PRINCIPLES, CORE VALUES AND
STANDARDS OF CONDUCT
II. PERSONNEL POLICIES
AND SUSTAINABILITY PRACTICES
III. CONFLICTS OF INTEREST AND
APPEARANCE OF IMPROPRIETY
IV. BRIBERY AND EXTORTION
V. HARASSMENT, DISCRIMINATION
AND RETALIATION
VI. POLITICAL AND CHARITABLE ACTIVITIES
VII. HEALTH AND SAFETY
VIII. INFORMATION SECURITY
AND INFORMATION TECHNOLOGY
IX. ENFORCEMENT PROCEDURES
4 8
13 21
23 31
36 41
50 Table of Contents
City of Chicago Department of Aviation, Mission (May 3, 2019), https://www.chicago.gov/city/en/depts/doa/auto_generated/doa_mission.html
I. ETHICAL PRINCIPLES CORE VALUES
AND STANDARDS OF CONDUCT
This section provides an introduction to CDA’s Code of Conduct. It starts with an overview of the Code of Conduct in the Municipal Code of Chicago which applies to every City official and employee. CDA’s Code of Conduct, which includes more specific governing rules, is not intended to supersede the City’s Code of Conduct or any other existing City policies, procedures, ordinances and laws. CDA employees remain bound by all City policies, procedures, ordinances and laws. This section provides an overview of CDA’s ethical principles which are intended to help all CDA employees and vendors perform their work professionally and conduct business with honesty and integrity at all times. These underlying principles will help CDA employees and vendors to learn or better understand the specific legal and ethical policies discussed in CDA’s Code of Conduct that govern their decision-making on a daily basis, as well as, their misconduct or wrongdoing. This section includes the following topics:
7 Professionalism,
Fairness and
Integrity
CDA Code of Conduct | 4
5 Municipal Code
of Chicago
Chapter 2-156 of the Municipal Code of Chicago (MCC), “Governmental Ethics” contains most of the City ordinances relating to ethics. Section
2-156-005 of that Chapter includes a twelve point
general Code of Conduct intended to guide the
conduct of City employees and officials. Other
sections of the chapter set forth specific ethical requirements related to these twelve general points.
In addition, CDA employees, CDA contractors and
their subcontractors are expected to comply with
the CDA’s Code of Conduct which incorporates
all of the requirements in the City’s Code of
Conduct.
• City employees must place loyalty to the federal and
Illinois constitutions, laws and ethical principles above their own private gain or interest
• City employees must give a full day’s work for a full day’s pay
• City employees must put forth an honest effort in the performance of their duties
• City employees must treat members of the public with
respect, and be responsive and forthcoming in meeting their requests for information
• City employees must act impartially, so that no private organization or individual is given preferential treatment • City employees must refrain from making unauthorized
promises that bind the City
• City employees must never use any nonpublic information for private gain
• City employees must engage in no business or financial transaction that is inconsistent with their City duties • City employees must protect and conserve City property and resources, and use the property and resources only for authorized purposes
Continues on next page
What do I need to know?
• The City’s Code of Conduct applies to every City official and employee
○ An “official” means any person holding any elected
office of the City or any appointed, non-employee
member of any City agency
○ An “employee” means an individual employed by
the City, whether part-time or full-time, but excludes
elected officials and City contractors
• The City’s Code of Conduct, which is incorporated into CDA’s Code of Conduct, also applies to every CDA contractor, CDA subcontractor and person seeking to do business
with CDA
○ “City contractor” means any person (including his or
her agents or employees) who is paid from the City treasury for services to any City agency
○ “Seeking to do business” means (1) taking any action
within the past 6 months to obtain a contract or business from the City; and (2) the contract or business sought
has not been awarded
Who is required by law to adhere to the Municipal City’s Code of Conduct? Code of
Chicago
Chapter 2-156
CDA Code of Conduct | 5
Municipal Code of Chicago, Chapter 2-156
http://www.chicityclerk.com/legislation-records/municipal-code
CDA Code of Conduct | 6
What do I need to know? (Cont.)
• City employees must disclose waste, fraud, abuse, and corruption
• City employees must adhere to all applicable laws
and regulations that provide equal opportunity for all
persons regardless of race, color, religion, gender,
national origin, age, sexual orientation or handicap
• City employees must not engage in, encourage or permit sexual harassment of another City employee
Municipal
Code of
Chicago
Chapter 2-156
(Cont.)
City employees are public servants who must
place loyalty to the City of Chicago and its
applicable laws, regulations and ethical principles
above their private gain or interest. City employees are expected to act in a respectful, impartial and professional manner in the performance of
their duties. CDA employees and vendors must
adhere to all applicable laws and regulations
that provide equal opportunity for all persons regardless of race, color, religion, gender, national origin, age, sexual orientation or handicap. City
contractors and subcontractors are expected to
be responsible and responsive to City contract requirements. CDA employees and vendors should make decisions that benefit the public interest and
engage in activities that are consistent with the
performance of their duties. CDA employees and
vendors must promptly report waste, fraud, abuse
and corruption to the appropriate authorities.
What do I need to know?
• City employees and contractors must report information to the Inspector General concerning conduct which involves corrupt or other unlawful activity by another City employee or person dealing with the City
• City employees who knowingly fail to report corrupt or unlawful activities will be subject to employment sanctions, including discharge. Contractors who knowingly fail to
report corrupt activities will constitute an event of default under their City contract
• Reports by City employees and contractors can be made to the Inspector General’s toll-free hotline
• City employees owe a fiduciary duty to the City at all times in the performance of their public duties
• City officials and persons holding a senior executive service position with the City (all positions listed in Appendix A to Chapter 2-74 of the MCC) must attend an ethics education seminar offered by the Board of Ethics within 120 days of their employment with the City or becoming a City official, and every four years thereafter. Other City employees
and officials must complete an ethics training program within 60 days
Professionalism, What type of conduct is prohibited by CDA? Fairness and
Integrity
CDA Code of Conduct | 7
• Do not give any private organization or individual preferential treatment
• Do not make any unauthorized promises purporting to bind the City or CDA
• Do not use any nonpublic information obtained through the performance of City work for private gain
• Do not engage in any business or financial transaction with any individual, organization or business that is inconsistent with the performance of your CDA duties or City contract • Do not use City time, equipment or facilities for private business purposes
• Do not seek other employment or contracts by use of your CDA position
• Do not use excessive profanity or offensive language in the workplace
• Do not accept gifts unless they fall into one of the exceptions under the City’s Governmental Ethics Ordinance. Although the City allows City employees to accept gifts under certain circumstances, CDA has a zero-gift policy which prohibits CDA employees and/or their family members from accepting gifts from vendors or prospective vendors
• Do not engage in, encourage or permit behavior constituting sexual harassment of any other City official or employee
II. PERSONNEL POLICIES AND
SUSTAINABILITY PRACTICES
This section highlights specific personnel policies of the City of Chicago that govern all City employees, including CDA employees. The purpose of these policies is to provide a set of principles for establishing and maintaining professional, harmonious and productive City employee relationships in the conduct of City business. In addition, CDA is embracing the best possible environmental, social and fiscally responsible practices to enhance the quality of life and complement the overall mission and goals of the City. CDA has implemented numerous airport industry-leading initiatives to improve natural resource conservation, operational efficiency, social responsibility and economic viability at O’Hare and Midway International Airports. Some of the fundamental objectives of good CDA administration and planning, as supported by these policies, include the promotion and increase of professionalism, effectiveness, efficiency, safety and high quality performance in the service of the City and CDA as it relates to the protection and use of City assets, the protection of confidential information, CDA’s sustainability and best practice environmental strategies, and the personal appearance of CDA employees.
12 Personal
Appearance
9 Protection
and Proper
Use of City
Assets
10 Privacy/
Confidential
Information
11 Sustainability
Practices
CDA Code of Conduct | 8
Protection
and Proper
Use of City
Assets
What do I need to know? What type of conduct is prohibited by the City and/or CDA?
• City property must be used for City government
purposes only - except when a specific policy, contract or agreement provides for personal use
• City employees have a right to engage in political activity - but cannot do so on City time, on City governmental property or with City resources
The responsibility for City-owned property is part
of every CDA employee’s job. Employees are
expected to use and operate City-owned property
in a careful and safe manner. You may not use
or permit the use of City-owned property for
any unauthorized purpose, including prohibited
political activity. City-owned property includes
City-owned computers, telephones, smartphones,
business cards, letterhead and other office supplies.
CDA Code of Conduct | 9
• Do not use City equipment, supplies, facilities and/or uniforms for private business purposes
• Do not use City equipment, supplies, facilities and/or uniforms for prohibited political activities. The use of City property for political campaign purposes is strictly prohibited. The wearing of any shirt, jacket, hat, insignia, badge or other emblem of office which is used to identify CDA employees or which was purchased or provided by the City, is prohibited while campaigning
• Do not engage in any political work, such as making telephone calls on behalf of any candidate for elected office, canvassing and/or evaluating contribution spreadsheets, while you are on compensated time or on City property or with City-issued property
• Do not solicit, accept or make political contributions on City property or during City compensated time
• Do not solicit or accept political contributions from a City vendor - unless you are a candidate for elected office
• Do not use any social media platform operated or administered by the City or that could be seen as reflecting official City policy or authority, for partisan political purposes
City of Chicago Department of Ethics, Education and Training, Political Activity: A Guide for City Employees and Officials (April 24, 2019), https://www.chicago.gov/content/dam/city/depts/ethics/ general/Publications/Pol-ACT-2015.pdf
Privacy/
Confidential
Information
What do I need to know? What are some examples of information that is considered to be confidential?
• Current and former CDA employees cannot use or disclose confidential information or any non-public information
other than in the performance of their official duties and responsibilities or as required by law
• CDA employees should not leave documents containing
confidential information in conference rooms, in photocopy areas, on desks or at work stations where they can be
seen by outsiders or unauthorized employees.Confidential information should not be displayed on computer screens when not in use.
• Additional or extra copies of confidential information should be shredded, and not discarded in trash cans
• CDA vendors must comply with the confidentiality provisions in their City contracts
• Personal information within public records
• Preliminary drafts, notes and recommendations, memoranda and other records in which opinions are expressed or policies or actions are formulated
• Trade secrets and commercial or financial information obtained from a City vendor which claims they are proprietary,
privileged or confidential and that disclosure would cause it competitive harm
• Proposals and bids for any contract, grant or agreement until an award or final selection is made
• Information that if disclosed could compromise security of the airports (see also “Sensitive Security Information”) It is a fundamental obligation of government to
operate openly and provide public records as expediently and efficiently as possible in compliance with the Illinois Freedom of Information Act (FOIA).
There are a number of exemptions under the Illinois
FOIA which prohibit confidential information from
being disclosed for inspection and copying. CDA
employees and vendors have an obligation to
protect confidential information.
CDA Code of Conduct | 10
Illinois Freedom of Information Act, 5 ILCS 140
CDA Code of Conduct | 11
What do I need to know? Which sustainability practices may be required of CDA contractors and
subcontractors?
• The purpose of the SAM is to integrate airport-specific sustainable planning and practices early in the design
process through planning, construction, operations,
maintenance and all airport functions with minimal impact to schedule or budget
• The SAM is based on existing federal, state and local regulatory requirements with additional sustainable and best practice environmental strategies and considerations • CDA employees, contractors and subcontractors responsible for the administrative, planning, design, construction, daily operations and maintenance functions for O’Hare and Midway International Airports are encouraged to consider and/or follow the SAM, as may be required
• Contractors’ administrative work associated with CDA contracts may be required to comply to the SAM as it relates to
green meetings, document reduction and recycling, recycled content paper, corporate sustainability and green procurement • Custodial work of CDA contractors and subcontractors may be required to comply to the SAM as it relates to green cleaning, storage and collection of recyclables, and the reduction of plastic waste
• CDA contractors may be required to have at least one LEEDaccredited principle participant on their team • CDA contractors may be required to provide assistance to CDA and/or its tenants in connection with community education and solid waste management
• CDA contractors and subcontractors are encouraged to
(1) promote the use of commuting by alternative transportation (2) change the purchase or use of material and products to reduce the amount of waste disposed of at landfills (3) use reusable containers or biodegradable bottles and (4) enhance innovation by reviewing, identifying and implementing new ideas, purchasing policies and actions
• CDA contractors are required to track, document and
report on their sustainability measures. CDA contractors may be required to submit a SAM Checklist
CDA is the first in the nation to develop sustainable
guidelines for design and construction at airports.
The Sustainable Airport Manual (SAM) was
created by CDA as an integral part of the City of
Chicago’s ongoing efforts toward implementing
more environmentally sustainable buildings and
civil infrastructure, incorporating best practice
guidance for planning, operations and maintenance of all City airport facilities and functions and those of its tenants.
Sustainability
Practices
City of Chicago Department of Aviation, Sustainable Airport Manual (April 29, 2019), https://www.flychicago.com/SiteCollectionDocuments/ Community/Environment/SAM/2018FullSAM.pdf
Personal
Appearance
What do I need to know? What are some general guidelines? • CDA employees should avoid extremes in dress, including your clothing, jewelry and other accessories. Personal
items should be in good taste and suitable for a professional work environment
• Use common sense and good judgment in your grooming
and dress attire
• Follow the specified guidelines which are not intended to be all inclusive
• When in doubt about the appropriateness of your attire, seek guidance and approval from your supervisor prior to wearing it • CDA employees must maintain a clean and
neat personal appearance
• Clothing and accessories must be professional
• Non-uniform clothing must be free from large logos or slogans. Shirts should not have large decals or pictures. All over prints are permitted. Inappropriate logos, slogans, or imagery are not permitted
• Footwear should be safe and appropriate for the job.
Flip flop soft toe shoes and open toe shoes are examples of footwear which may be prohibited based on section
assignment
Because CDA employees and vendors represent
the City of Chicago and CDA, they are required
to be businesslike in their mode of dress and personal grooming. They are expected to maintain a well-groomed, neat, professional appearance
at all times. Different work activities may dictate
different types of dress requirements. CDA also
recognizes that personal taste and style trends
may vary and that our dress standard is not meant
to infringe on your personal expression.
CDA Code of Conduct | 12
III.CONFLICTS OF INTEREST AND APPEARANCE
OF IMPROPRIETY
City employees owe a fiduciary duty to the City of Chicago in the performance of their public duties. They are prohibited from engaging in improper influence, the appearance of impropriety and representing other persons. No employee can make, participate or use their position to influence any City governmental decision or action in which they have a financial interest (ie, derived income or compensation in the previous year or expect to derive income or compensation in the next year or have an ownership interest that is worth $1,000 or more or have any financial interest distinguishable from that of the general public).
No elected official or any person acting at the direction of such official can contact any other City official or a CDA employee with respect to any matter involving any person with whom the elected official has a business relationship.
City employees cannot make or participate in the making of any decision with respect to any matter in which they have a financial interest. No elected official or City employee may represent or derive any compensation from the representation of any person other than the City of Chicago in any proceeding or transaction. This section includes the following topics:
14 Lobbying
15 Personnel
Second Jobs
16 Post-Employment
(Revolving Door)
Restrictions
18 Gifts and
Other Favors
CDA Code of Conduct | 13
20 Business
Travel
CDA Code of Conduct | 14
• City employees and elected officials are prohibited from acting as lobbyists before any City department or agency.
• Mayoral appointees who serve on City boards or commissions may engage in lobbying the City on behalf of their employers or clients
• With some exemptions, all persons who lobby must register with the Board of Ethics every year and file reports four times each year of their lobbying activity, compensation and
expenditures, campaign contributions and an itemized list of all gifts given to City personnel and their recipients.
Only lobbyists are required to register – neither their clients nor the City employees and officials they lobby need to register • CDA employees are not required to talk to lobbyists
• City policy-makers must report to the Board of Ethics the names of anyone they believe has lobbied them and
who they know haven’t registered. You may simply
call the Board or send it an email with the name of the lobbyist
Lobbying What do I need to know? Under City law, who is considered a lobbyist?
• A lobbyist is any person who attempts to influence City decisions on behalf of another, like a client or employer, regarding City administrative or legislative matters. These matters include (1) a zoning matter (2) the preparation of contract specifications (3) the solicitation, award or administration of a contract (4) the award or administration of a grant, loan or other agreement involving the disbursement of public monies or (5) any other determination made by an elected or appointed City official or employee of the City with respect to the procurement of goods, services or construction
• Participating in a procurement process by responding to an RFP or RFQ is not considered lobbying
• CDA employees and contractors should contact the Board of Ethics for advice on specific situations
The City of Chicago’s lobbying law is one of the
broadest in the United States. Almost any private
sector person who meets with or contacts City
employees or officials to talk business could
be considered lobbying. It is acceptable for people
to lobby – it is a right guaranteed by the Constitution. However, it is a regulated activity. The Board of Ethics regulates lobbying in and before City
government.
City of Chicago Department of Ethics, Education and Training, Lobbying Chicago Government: A Plain Language Guide For Non-Profits (April 27, 2019), https://www.chicago.gov/city/en/depts/ethics/auto_generated/edu_publandreports.html
CDA Code of Conduct | 15
• CDA strives to provide the best service to its customers and it requires the full attention and efforts of CDA employees.
To this end, CDA focuses on shared values, purpose and
vision and neither endorses nor precludes employees from seeking employment outside their positions with CDA
unless it presents a conflict of interest or has any potential for negative impact on CDA
• CDA employees must obtain written permission from the CDA Commissioner to engage in secondary employment or
outside business activities
• For authoritative guidance about outside employment, CDA employees are encouraged to contact the CDA ethics officer or the Board of Ethics
Personnel
Second Jobs
What do I need to know? What restrictions does the City or CDA impose on CDA employees who have or
seek outside employment?
• CDA employees may not engage in a profession, business, trade, investment, occupation or other activity that results in a conflict of interest with their CDA employment
• Any CDA employee holding outside employment
must demonstrate satisfactory performance in their job
responsibilities with CDA at all times.All CDA employees will be expected to meet the job performance standards
established by CDA and will be subject to CDA work and
scheduling demands, regardless of any other outside
work requirements
• If CDA determines that an employee’s outside work
interferes with their job performance or the ability to meet the requirements of CDA at any time, the employee
may be asked to terminate the outside employment
The City of Chicago recognizes that some employees may need or want to hold additional jobs outside their employment with the City. The City
does not prohibit City employees and officials from
having outside employment. However, the City
imposes restrictions on City personnel who have
outside employment, both while they are on their
outside jobs and while they are in their City positions.
City of Chicago Department of Ethics, Education and Training, City of Chicago Guide to Personnel Concerning Second Jobs (April 27, 2019), https://www.chicago.gov/city/en/depts/ethics/auto_generated/edu_ publandreports.html
CDA Code of Conduct | 16
• Department heads and non-clerical employees of the Mayor’s Office may not, for two years after leaving the City, lobby any City department, employee or official
• Other former Shakman-exempt City employees from the
Executive Branch, and Mayoral appointees to City boards or commissions, may not, for two years after leaving the City, lobby the City department, agency or commission in which they served, or any City employee or official in a department, agency or commission in which they served
• For one year after a City employee or official leaves the City, he or she may not assist, represent or lobby on a business transaction that involve the City if, while working for the City, he or she was personally and substantially involved in the subject matter of that transaction
• If a former City employee or official exercised contract management authority with respect to a City contract, he or she may not assist any person on that contract
• A former City employee or official cannot assist or represent any person other than the City in any judicial or quasi-judicial proceeding involving the City if he or she was counsel
of record or personally and substantially involved in that proceeding during City service. This bar lasts throughout the proceeding
Continues on next page
PostEmployment
(Revolving Door)
Restrictions
What do I need to know? What are the penalties for violating these restrictions?
• Any contract negotiated, entered into or performed in violation of these restrictions can be voided by the City
• Violators can be fined up to $2,000 per offense
• Permits, licenses, rulings, determinations or other official City actions sought, obtained or begun in violation of the Ordinance are invalid
• The City may pursue all legal or equitable remedies
against violators
The City of Chicago has post-employment or
“revolving door” restrictions that are designed to
prevent former government personnel from improperly profiting from their government connections or inside knowledge. After CDA employees leave
their City employment or service, there may be
certain activities, matters or projects with or before the City on which they cannot work. There are certain restrictions, none of which apply to former
City officials or employees who become employed
by and act on behalf of another government
agency. There are severe penalties for violating the
restrictions.
City of Chicago Department of Ethics, Education and Training, A Plain English Guide to Chicago’s “Revolving Door” Restrictions (April 27, 2019), https://www.chicago.gov/city/en/depts/ethics/auto_generated/ edu_publandreports.html
CDA Code of Conduct | 17
• A former City employee or official may never disclose confidential or non-public information obtained in the course of City service
• City officials or employees may not negotiate possible future employment with any person, except another governmental entity, with a matter pending before them. If City employees or officials want to negotiate with such persons or companies, they must recuse themselves from all City matters involving the potential employer and/or delegate responsibilities to other City employees
What do I need to know? (Cont.) PostEmployment
(Revolving Door)
Restrictions
(Cont.)
CDA Code of Conduct | 18
• City contractors which have or are seeking an economic interest in CDA shouldn’t offer or give a gift, regardless of value, to any CDA official or employee
• City employees may not accept any anonymous gift, any cash gift, and any gift, money or other item, regardless of value, in exchange for advice or assistance on City business
• If offered or sent a gift from a City vendor, CDA employees should promptly return the gift to the giver with a letter that thanks the giver, identifies or describes the gift, and informs the giver that the gift is being returned because CDA employees are prohibited from accepting gifts from
City vendors under CDA’s zero-gift policy
• City employees may give any gift to co-workers at their level or at a lower pay rate
• City employees may not give their official superior any gift other than a non-cash item or gift card worth $10 or less • City employees may not solicit co-workers for a gift to any official superior
• Gifts during the holiday season for grab bag parties must be worth $10 or less and cannot be cash in any amount
• Official superiors may never coerce their subordinates into giving or contributing to a gift
• As a best practice - CDA employees should consult
with CDA or the Board of Ethics prior to accepting a gift from persons who are not City vendors or prospective
vendors, relatives or personal friends
Continues on next page
Gifts and
Other Favors
What do I need to know? What are the exceptions to the City’s gift restrictions under the City’s
Governmental Ethics Ordinance and/or
CDA’s zero-gift policy?
• Any opportunity, benefit, loan or service offered to the public on the same terms
• Anything for which the City official or employee pays the fair market value
• Any lawful campaign contribution
• Gifts from relatives
• Gifts from an official superior
• Gifts from personal friends
• Any bequest, inheritance or other transfer at death
• Gifts accepted on the City’s behalf
• Any award for public service provided that such award is not cash, a gift card or a cash equivalent
• Materials or travel expenses related to public or
governmental educational purposes
• Any food, refreshment, lodging, transportation or other benefit resulting from outside business, employment or
community activities of the City employee
Continues on next page
Because gifts might lead City employees to favor or
appear to favor the giver, such as their employee,
a City bidder/contractor, lobbyist or applicant, City
employees cannot accept gifts unless they fall into
one of the exceptions under the City’s Governmental Ethics Ordinance. City employees or officials, their spouses, domestic partners and immediate
family members or other relatives living with them,
may not accept any gift or combination of gifts
worth more than $50 from a single source per year
unless it falls into an exception. Although the City
of Chicago allows City employees to accept gifts
under certain circumstances, CDA has implemented
department policies that are more restrictive than the
City’s Governmental Ethics Ordinance.CDA has a
zero-gift policy. CDA’s gift policy prohibits CDA employees and/or their family members from accepting any gifts from vendors or prospective vendors.
The CDA zero-gift policy applies to any employee
whose duties or responsibilities involve CDA. A
gift is anything of value given without fair market
consideration. Simply put - a gift is anything that
you receive without giving anything in return.
City of Chicago Department of Ethics, Education and Training, Gift Restrictions – A Plain English Guide (April 27, 2019), https://www.chicago.gov/city/en/depts/ethics/auto_generated/edu_publandreports.html
• Reasonable hosting, including travel and expenses, entertainment, meals or refreshments furnished in connection with meetings, appearances or public events or ceremonies related to official City business
• CDA employees may attend holiday events hosted by
City vendors, prospective bidders/vendors seeking to do business with CDA and/or labor organizations, provided
they reimburse the organization for the per person cost and document their payment. The amount paid by the
CDA employee is not reimbursable by CDA
CDA Code of Conduct | 19
Gifts and
Other Favors
(Cont.)
• City employees may contribute any amount toward food or drinks to be shared in the office among co-workers or in-office holiday parties
• Any gift that a lobbyist gives to a City employee or official must be reported with the recipient’s name. City employees do not violate this law if they promptly take reasonable action to return a prohibited gift or transfer any tangible or perishable gift to a tax-exempt charity
• When in doubt about accepting a gift – just say “no thank you” or contact the appropriate persons at CDA and/or the Board of Ethics
• CDA employees, City contractors and their subcontractors must register, view an online gift policy training video, and sign and present an Acknowledgment and Certification Form
What do I need to know? (Cont.) What are the exceptions to the City’s gift restrictions under the City’s Governmental Ethics Ordinance and/or CDA’s zero-gift policy? (Cont.)
CDA Code of Conduct | 20
• City employees and officials must receive approval from the Board of Ethics before they accept and attend meetings related to public or governmental educational purposes. The Board recommends that they seek approval or advice as soon as possible after receiving a meeting invitation
• City employees and officials must also report the business travel to the Board of Ethics within 10 days after their travel • City employees and officials may accept reasonable hosting expenses, including travel, food and/or refreshments, for meetings, appearances or public events or ceremonies related to official City business, if offered by third parties. However, the third party offering these expenses must be the sponsor of the meeting, event or ceremony; City employees must
receive approval from the Board of Ethics before they accept and attend; and City employees must report their acceptance to the Board of Ethics within 10 days of the meeting or event • CDA employees and officials should first check with the CDA Ethics Officer to determine whether CDA has any special rules which may prevent the employee from accepting an invitation • City employees and officials who engage in business travel must always make sure that they also comply with the City’s Official Travel Policy
• City employees and officials are not allowed to accept any honorarium – gifts or money offered for participating in speaking engagements, lectures, conferences or panels
Business
Travel
What do I need to know? What does “reasonable travel
expenses” mean?
• It means only those expenses paid by a third party that are directly related to the business purpose of your trip or meeting. Optional entertainment expenses, such as golf, are not included
• For additional information, refer to the City’s Office of Budget & Management travel guide for City personnel
CDA employees, like other City employees and
officials, receive invitations from third parties, other than the City of Chicago itself, to travel out of town on City business or to attend conferences.
In most cases, City employees and officials are
allowed to accept materials or reasonable travel
expenses from a third party to attend meetings
related to public or governmental educational purposes. However, certain steps must be followed by City employees, including CDA
employees.
City of Chicago Department of Ethics, Education and Training, A guide for City Business Travelers (April 27, 2019), https://www.chicago.gov/ city/en/depts/ethics/auto_generated/edu_publandreports.html
22 Bribery
and Extortion
IV. BRIBERY AND EXTORTION
Under Illinois law, there are a number of ways in which one may be charged and convicted of bribery (Class 2 felony). City employees cannot accept bribes and payoffs from City bidders, contractors and/or subcontractors by using their position to influence any governmental decision or action. An individual may be found guilty of bribery if they have the intent to influence the performance of any act related to the employment or function of any public officer, public employee, juror or witness.
CDA Code of Conduct | 21
CDA Code of Conduct | 22
• Do not promise, or tender property or personal advantage to a CDA employee who cannot lawfully accept the property or personal advantage
• Do not promise, or tender property or personal advantage to an individual believed to be a City official or CDA employee who cannot lawfully accept the property or personal advantage • Do not promise, unlawfully receive, retain or agree to accept any property or personal advantage with the knowledge
that the property or personal advantage was promised or tendered with the purpose of influencing the performance of any act related to the employment or functions of a
CDA employee
• Do not promise, solicit, receive, retain, or agree to accept any property or personal advantage pursuant to an understanding that they will improperly influence or attempt to influence the performance of any act related to the employment or function of a CDA employee
Bribery and
Extortion
What should I do to avoid a charge of
bribery in connection with contracting
with CDA?
What are some examples of bribery?
• Paying a public official in exchange for their decision to veto a bill or approve a contract award
• Giving a City employee NBA season tickets in exchange for their influence of the City’s bid evaluation process • Paying for and/or taking a CDA employee on a vacation in exchange for the employee’s promise to manipulate
City bid documents
The City of Chicago prohibits bribery and
extortion. Bribery is the act of giving or receiving
something in exchange for another individual’s act
to influence other conduct. Any violation of this law
by CDA employees will result in their immediate
dismissal and prosecution to the fullest extent of
the law. This section provides information about
bribery and examples of it.
Illinois Criminal Code, 720 ILCS 5/33E
V. HARASSMENT, DISCRIMINATION
AND RETALIATION
The City of Chicago prohibits discrimination and harassment in the workplace. The City is committed to providing a work environment that is free of discrimination and harassment. Harassment is unwelcome verbal or physical conduct toward an individual or a group because of a protected class. The City prohibits harassment based on race, color, sex, gender expression or identity, age, religion, disability, national origin, ancestry, sexual orientation, marital status, parental status, military service or unfavorable discharge from military service and any other status or characteristic protected by federal, state or local law, regulation or ordinance. Retaliation against any person who makes a good-faith report of discrimination or harassment is also prohibited. This section includes the following topics:
CDA Code of Conduct | 23
24 Equal
Employment
Opportunity
26 Civil Rights Act
of 1964
27 Workplace
Harassment
28 Sexual
Harassment
29 Bullying
30 Retaliation
CDA Code of Conduct | 24
Equal
Employment
Opportunity
The City of Chicago is an Equal Employment
Opportunity employer. It is committed to providing
equal opportunity or treatment in its recruitment,
hiring, performance evaluations, promotions, demotions, transfers, discipline and termination and in all other employment practices and decisions. The
City follows applicable federal, state, local laws,
regulations and ordinances prohibiting discrimination and harassment in the workplace. The City has a Diversity and Equal Employment Opportunity
Policy (“EEO Policy) to ensure the full and active participation of all employees in the City’s workforce and provide an effective means for the
resolution of complaints of discrimination and
harassment. Through this policy, the City seeks to
recruit, nurture and retain a workforce that reflects
the diversity of our communities throughout Chicago.
The City’s EEO Policy is implemented and enforced
by the Department of Human Resources (DHR).
What do I need to know? What type of conduct is prohibited by the City?
• The City encourages its employees, volunteers and
any other individuals to raise any concerns regarding the implementation of its EEO Policy to DHR or the CDA
EEO Liaison
• The City’s EEO Policy applies to volunteers and employees, whether paid or unpaid, of the City, as well as applicants for City employment. The City’s EEO Policy also applies to the employees of City vendors or contractors and members of the public
• Conduct that may not be considered unlawful under applicable federal, state or local law may nevertheless violate the City’s EEO Policy and result in disciplinary action, up to and including discharge
• Any supervisor who becomes aware of conduct that may
be considered discriminatory, harassing or retaliatory must promptly report such conduct
• A dating relationship and/or physically intimate relationship between a supervisor and subordinate may create
the appearance of impropriety. Any supervisor who works for CDA and has such a relationship with another City
employee or volunteer must report it to the CDA Commissioner, in writing • Any employee, volunteer or applicant for City employment who believes that they have been discriminated against
or harassed or who claims to have suffered retaliation, may file a complaint with DHR and also report the conduct to the CDA EEO Liaison
Continues on next page
• The City prohibits discrimination based on race, color, sex, gender expression or identity, age, religion, disability, national origin, ancestry, sexual orientation, marital status, parental status, military service or unfavorable discharge from military service and any other status or characteristic protected by federal, state or local law, regulation or ordinance
• The City prohibits sexual harassment
• The City prohibits other forms of harassment based on race, color, sex, gender expression or identity, age, religion, disability, national origin, ancestry, sexual orientation, marital status, parental status, military service or unfavorable discharge from military service and any other status or characteristic protected by federal, state or local law, regulation or ordinance • The City prohibits retaliation against any person who in good faith asserts his or her rights by (1) opposing discriminatory practices in the workplace (2) complaining about prohibited conduct; or (3) complaining to, cooperating with or assisting in resolving a complaint of discrimination. Actions which may be considered retaliatory include, but are not limited to, refusal to hire, denial of promotion or job benefits, demotion and suspension or discharge
City of Chicago Diversity and Equal Employment Opportunity Policy (February 1, 2019), https://www.chicago.gov/content/dam/city/depts/ dhr/supp_info/HRpolicies/COC_EEO_Policy_Final_eff_0_01_19.pdf
Equal
Employment
Opportunity
(Cont.)
CDA Code of Conduct | 25
What do I need to know? (Cont.)
• Persons who believe they are victims of sexual harassment by a City elected official may report the matter to the Board of Ethics or to the Office of the Inspector General (OIG)
• Any employee or volunteer who knowingly makes a false accusation of discrimination, harassment or retaliation or knowingly provides false information in the course of an investigation, may be subject to discipline
• Complaints made by individuals employed by a City
contractor alleging that a City employee has engaged in conduct that may violate the City’s EEO Policy should
be made to the OIG
• Complaints by members of the public alleging that a City employee has engaged in conduct that may violate the City’s EEO Policy should be made to the OIG
• City employees or volunteers found to be in violation of the City’s EEO Policy may be subject to discipline, up to and including discharge
• City contractors found by CDA to have engaged in
discriminatory, harassing or retaliating conduct may
be subject to penalty up to and including contract
termination and/or suspension or debarment
CDA Code of Conduct | 26
Civil Rights
Act of 1964
Under the Civil Rights Act of 1964 (“Civil Rights
Act”), segregation on the grounds of race, religion
or national origin was banned at all places of public accommodation, including courthouses, parks, restaurants, theaters, sports arenas and hotels. No
longer could minorities be denied service based
on the color of their skin. The Civil Rights Act also
barred race, religious, national origin and gender
discrimination by employers and labor unions, and
created an Equal Employment Opportunity Commission with the power to file lawsuits on behalf of aggrieved workers. Additionally, the Civil Rights
Act forbade the use of federal funds for any discriminatory program and gave certain powers to the Commission on Civil Rights.
Title VI of the Civil Rights Act prohibits discrimination on the grounds of race, color, and national origin by
programs and activities that receive federal funds,
which include the City’s airport operations and the
CDA. Section 520 of the Airport and Airway Improvement Act of 1982 added sex and creed to the list of race, color, or national origin as prohibited bases of
discrimination in the FAA’s grant program. Additionally, Section 504 of the Rehabilitation Act of 1973 and titles II and III of the Americans with Disabilities Act of 1990 prohibit discrimination on the basis of
disability.
What do I need to know? What is an “unlawful employment practice” under Title VII of the Civil
Rights Act? • The Civil Rights Act prohibits state and municipal governments from denying access to public facilities
on the grounds of race, color, religion or national
origin
• The Civil Rights Act expands the Civil Rights Commission with additional powers, rules and procedures
• The Civil Rights Act prevents discrimination by programs and activities that receive federal funds. If a recipient of federal funds is found in violation, that recipient may lose its federal funding
• The Civil Rights Act prohibits discrimination and/or unlawful employment practices by covered employers on the basis of race, color, religion, sex or national origin
• The Civil Rights Act established the Community Relations Service, which is responsible for assisting in community disputes involving claims of discrimination
• To fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual because of the individual’s race, color, religion sex or national origin with respect to their
○ Compensation
○ Terms of employment
○ Conditions of employment
○ Privileges of employment
• To limit, segregate or classify employees in any way
which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect
their status as an employee because of the individual’s race, color, religion sex or national origin
• To discriminate against any individual because of his race, color, religion, sex or national origin in admission to or employment in any program established to provide
apprenticeship or other training
• To discriminate against any employees or applicants for employment because the employee has opposed any practice made an unlawful employment practice by this title or because the employee has made a charge, testified, assisted or
participated in an investigation, proceeding or hearing under this title
• To print or publish any employment notice or advertisement that indicates any preference, limitation, specification or discrimination based on race, color, religion, sex or national origin, except when it is a bona fide occupational qualification for employment
The Civil Rights Act of 1964, 78 Stat 241
CDA Code of Conduct | 27
Workplace
Harassment
The City of Chicago prohibits workplace harassment based on race, color, sex, gender expression or identity, age, religion, disability,
national origin, ancestry, sexual orientation,
marital status, parental status, military service
or unfavorable discharge from military service,
credit history and any other status or characteristic protected by federal, state or local law, regulation or ordinance. The City has a duty to
maintain a work environment free of harassment
based on any of these protected classes.
What do I need to know? What are some examples of workplace harassment?
• Harassment is defined as slurs and other verbal or physical conduct relating to an individual’s membership in a protected class when the conduct (1) has the purpose or effect of creating an intimidating, hostile or offensive working environment (2) has the purpose or effect of unreasonably interfering with an individual’s work performance or
(3) otherwise adversely affects an individual’s employment opportunities
• Harassment often consists of a series of incidents which are found to be severe or pervasive enough to create
a hostile work environment
• Workplace harassment should be reported to your supervisor.
Employees or volunteers found to have engaged in workplace harassment may be subject to discipline, up to and including discharge. Supervisors who knowingly permit or ignore
workplace harassment in the workplace will be subject to disciplinary action
• Repeated derogatory or offensive comments related to
a person’s protected class
• Displaying insensitive pictures, cartoons and jokes about a protected class or disseminating such material through workplace email
• Repeated threats of dismissal or severe discipline
without cause
• Excluding or isolating a person from workplace activities because of their protected class
• Making fun of an individual’s religious practices
• Extreme criticism of an individual’s work performance in front of other employees or customers
• Distribution, display, viewing, downloading or discussion of any written or graphic material, including online content, voicemail, email, text messages, calendars and posters
that are sexually suggestive or show hostility toward an individual or group based on a protected class
City of Chicago Diversity and Equal Employment Opportunity Policy (February 1, 2019), https://www.chicago.gov/content/dam/city/depts/ dhr/supp_info/HRpolicies/COC_EEO_Policy_Final_eff_0_01_19.pdf
CDA Code of Conduct | 28
Sexual
Harassment
The City of Chicago prohibits sexual harassment.
No person should be required to endure sexual
harassment by supervisors or coworkers or as
a condition of employment or as a condition of
receiving City services.
What do I need to know? What are examples of conduct which may be considered sexual harassment?
• Sexual harassment includes any unwelcome sexual advance or request for sexual favors or conduct of a sexual nature when (1) submission to such conduct is made, either explicitly or implicitly, a term or condition of an individual’s employment or receipt of City services (2) submission to or rejection of such conduct by an individual is used as the basis of an employment or service decision affecting the individual or (3) such conduct has the purpose or effect of interfering with the work performance of an employee or volunteer
or creating an intimidating, hostile or offensive work
environment
• There is a broad range of conduct which may be considered sexual harassment under the City of Chicago Diversity and Equal Employment Opportunity Policy
• Sexual harassment should be reported to your supervisor.
Employees or volunteers found to have engaged in sexual harassment may be subject to discipline, up to and including discharge. Supervisors who knowingly permit or ignore
sexual harassment in the workplace will be subject to
disciplinary action
• Elected officials who engage in conduct alleged to constitute sexual harassment may be investigated pursuant to
the Governmental Ethics Ordinance.Complaints of sexual
harassment committed by an elected official will be reported to the Board of Ethics or the Office of Inspector General • City contractors must have a written policy prohibiting sexual harassment that include, at a minimum (1) the illegality of sexual harassment (2) the definition of sexual harassment and (3) the legal recourse available for victims of sexual harassment. A contractor’s failure to have a written policy will constitute an event of default which could result in contract termination
• Sexually suggestive or offensive remarks
• Sexually suggestive pictures or graffiti
• Sexually suggestive gesturing
• Verbal harassment or abuse of a sexual nature
• Display of sexual objects
• Implicit or explicit requests for sexual favors
• Repeated requests for dates that are unwelcome
• Stalking
• Sexual assault
• Touching, patting or pinching
• Sending sexually suggestive email or text messages
• Displaying sexually suggestive sites on the Internet
City of Chicago Sexual Harassment in Employment Policy (April, 25, 2019), https://www.chicago.gov/content/dam/city/depts/cchr/AdjSupportingInfo/AdjFORMS/SexualHarassmentinEmployment.pdf
CDA Code of Conduct | 29
• Bullying is characterized by the following criteria (1) it is aggressive behavior or intentional harmdoing (2) it is
carried out repeatedly and over time and (3) it occurs within an interpersonal relationship characterized by an imbalance of power. Personality conflicts or not liking someone are not considered bullying
• There is a broad range of conduct which may be considered bullying
• Bullying should be reported to your supervisor. Employees or volunteers found to have engaged in bullying may be
subject to discipline, up to and including discharge. Supervisors who knowingly permit or ignore bullying in the workplace will be subject to disciplinary action
Bullying What do I need to know? What are examples of bullying conduct? • Cyber bullying - overt or covert behaviors using digital technologies, including hardware such as computers and
smartphones, and software such as social media, instant messaging, texts, websites and other online platforms. This may include abusive or hurtful texts, emails or posts,
images or videos, nasty gossip or rumors, imitating others online or using their login
• Exclusion – socially or physically excluding or disregarding a person in work-related activities
• Gesture bullying – nonverbal threatening gestures including glances that convey threatening messages
• Physical bullying – pushing, shoving, kicking, poking, tripping, assault, threat of physical assault or damage to a person’s work area or property
• Social bullying – sometimes this is referred to as covert bullying. It is carried out behind the bullied person’s back and designed to harm someone’s social reputation and/or cause humiliation. Activities include lying, gossip, spreading rumors, playing jokes to embarrass and humiliate and
damaging someone’s reputation or social acceptance
• Verbal bullying – slandering, ridiculing or defaming a person or his or her family, persistent name calling that is hurtful, insulting or humiliating, abusive and offensive remarks
CDA prohibits employees from bullying other
employees whether or not the incidents occur
on the premises of CDA or during work hours.
Bullying is repeated inappropriate behavior, either direct or indirect, whether verbal, physical or otherwise, conducted by one or more persons
against another or others, at the place of work
and/or in the course of employment.
CDA Code of Conduct | 30
Retaliation What do I need to know? What type of actions could be considered retaliatory?
Retaliation against any person who makes a
report of discrimination or harassment in the workplace or who reports potential violations of the CDA Code of Conduct or cooperates with or assists the
City of Chicago and/or CDA in enforcing this Code
of Conduct is expressly forbidden. The City prohibits retaliation against any person who in good faith asserts their rights by opposing discriminatory practices in the workplace; complaining about prohibited conduct; or complaining to, cooperating with or assisting in resolving a complaint of discrimination or harassment.
• CDA will not accept any retaliatory or negative actions against its employees, contractors or subcontractors, including DBE/MBE/WBEs, who raise legitimate compliance concerns
in good faith in connection with this Code of Conduct and/or a City contract
• If any retaliatory action is taken against a CDA employee, the employee may be entitled to reinstatement to either the same position held before the retaliatory action or to an equivalent position, two times the amount of back pay, and reinstatement of full fringe benefits and seniority rights.
The employee or other persons may also be entitled to
reconsideration of a City permit, license, certification, loan, grant, tax credit, other financial subsidy or City service denied or revoked
• Reprimand, discharge, suspension, demotion or denial of promotion or transfer of an employee
• Denial or revocation of any City permit, license, certification, loan, grant, tax credit or financial subsidy, the denial of any City service or the denial of City employment for which a person is qualified
City of Chicago, Department of Human Resources,
City of Chicago Diversity and Equal Opportunity Policy (Dec. 30, 2019), https://webapps1.chicago.gov/onlineTrainingWeb/trainingDocuments/ GeneralDocuments/CoCDEEOPSecIIb.pdf
VI. POLITICAL AND CHARITABLE ACTIVITIES
City employees have the right under State law to exercise their political rights by being politically active. Their political activities may include: working on political campaigns; circulating candidate petitions; organizing or participating in political meetings, rallies or demonstrations; making or soliciting political contributions; preparing reports of campaign contributions; assisting at the polls; soliciting votes; managing or working on a campaign for elective office; distributing campaign literature, signs or other campaign material; or campaigning for elective office. Although the City of Chicago does not want to inhibit or prohibit any of its employees from exercising their political rights to engage in any of these political activities, the City has laws that restrict City employees from improperly using taxpayer funds and public resources. This section provides an overview of the applicable laws that prohibit City employees from engaging in political activity with or on government property, at work or on government time.
The City recognizes that many employees serve as staff or Board members of non-profit social service or neighborhood organizations, religious organizations or other 501(c) (3) entities.Generally speaking, the City considers this to be a good thing and does not prohibit City employees and officials from participating in charitable activities.
However, the City does impose restrictions on outside volunteer activities by City employees. This section provides information about what City employees need to know about those restrictions, as well as what CDA employees need to do.
This section includes the following topics:
32 Campaign
Financing
and Political
Contributions
CDA Code of Conduct | 31
33 Nepotism
34 Political Hiring
(Shakman Accord)
35 Charitable
Activities
CDA Code of Conduct | 32
• Do not intentionally solicit, accept or make political contributions, circulate petitions or collect signatures on or with City property or during City compensated time
• Do not solicit or accept political contributions from any person or vendor doing business with the City or from any other City official or employee over whom you
exercise supervisory authority
• Do not offer any anonymous contribution or any contribution other than in the name of the donor to any candidate for City elected office or the candidate’s political committee; any candidate’s spouse, domestic partner or minor child; or any person acting on behalf of the candidate or their committees • City employees and Mayoral appointees are also prohibited from making any political contributions to the Mayor or to their political committee
• City employees with contract management authority are prohibited from serving on any political fundraising
committee
○ “Contract management authority” means personal
involvement in or direct supervisory responsibility for the formulation or execution of a City contract
Campaign
Financing and
Political
Contributions
What are some of the City restrictions
that apply to the conduct of City
employees?
What are some additional City restrictions
that also apply to the conduct of City
contractors and subcontractors?
• Do not give or offer any political contribution to any candidate for City elected office based on an explicit or implicit mutual understanding that the recipient’s votes, official actions, decisions or judgments concerning City business would be influenced by it
• Do not make any cash contributions in excess of $250 to any candidate for City elected office
• City contractors, subcontractors and their owners, owners’ spouses or domestic partners, and their registered lobbyists are prohibited from making any political contributions to the Mayor or their political fundraising committee
• City contractors and subcontractors are prohibited from coercing, compelling or intimidating their employees to make a contribution to the Mayor or their political committee, or bundling contributions to the Mayor or their political committee • Do not contribute more than $1,500 in political contributions in a calendar year to any City elected official, candidate for City elected office or City employee or official seeking election to any other office or any of their political committees if you are a lobbyist, or doing or seeking to do business with the City or its sister agencies
• Do not contribute more than $5,600 per election cycle to a State elected official, such as those running for Governor or the Illinois General Assembly. The amount is adjusted by the State Board of Elections in every odd year
• Do not contribute more than $2,500 per candidate per election (and $100 for cash contributions) to candidates for federal elected office, such as U.S. Senator or President
The City of Chicago has laws governing
political contributions by individuals, including
public officials, City employees, City contractors,
subcontractors and their owners, owners’
spouses or domestic partners, and their registered lobbyists. The City prohibits some political contributions to all persons running for elected City offices and provides monetary limits on others. The limits apply to political contributions
to City officials or employees seeking election to
non-City offices. There are fines for making excess contributions.
City of Chicago Department of Ethics, Education and Training, Political Activity and Election Work: A Plain English Guide (April 27, 2019), https://www.chicago.gov/city/en/depts/ethics/auto_generated/edu_ publandreports.html
CDA Code of Conduct | 33
Nepotism What do I need to know? Which family members are considered to be my “relatives”?
CDA prohibits nepotism which is favoritism shown
or patronage granted in employment or working
conditions by a public official or public employee to relatives, domestic partner or persons with whom the employee resides.
• City employees cannot hire or advocate for hiring their relative, domestic partner or persons with whom the
employee resides, in a City agency in which they serve
or exercise authority, except an Alderman’s personal
staff hired as a City employee
• City employees cannot exercise supervisory authority
over a relative, domestic partner or persons with whom
the employee resides, except an Alderman’s personal
staff hired as a City employee
• City employees cannot use their City position to help a relative, domestic partner or persons with whom the
employee resides, acquire a position with anyone whose
City work they oversee
• City employees cannot exercise contract management
authority over City work done by a person or firm that
employs or contracts with their relative, domestic partner or persons with whom the employee resides
• “Relative” means a person who is related to an official, candidate for City office or employee as spouse or as any of the following, whether by blood or by adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughterin-law, brother-in-law, sister-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister, half-brother or half-sister
CDA Code of Conduct | 34
Political Hiring
(Shakman
Accord)
What do I need to know? What are examples of political reasons or factors?
The City of Chicago is subject to the May 31,
2007 Order entitled “Agreed Settlement Order
and Accord” (Shakman Accord) and the June 24,
2011 “City of Chicago Hiring Plan” which prohibits
the City from hiring persons as governmental
employees in non-exempt positions on the basis
of political reasons or factors.
• City employees cannot direct any individual to apply for a position with a City contractor, either as an employee or as a subcontractor
• City employees cannot direct City contractors to hire an individual as an employee or as a subcontractor. City
contractors must follow their own hiring and contracting procedures without being influenced by City employees
• Any and all personnel provided by City contractors on City contracts must be their employees or subcontractors, not employees of the City
• City contractors cannot condition any term of the employment of any personnel provided under City contracts or offer employment to any individual to provide services to the City because of any political reason or factor
• City contractors must promptly report any communications by City employees or officials to them in violation of these prohibitions to the Office of the Inspector General and to CDA or the relevant City department
• Political reasons or factors include
○ Any individual’s political affiliation
○ Membership in a political organization or party
○ Political support or activity
○ Political financial contributions
○ Promises of such political support, activity
or financial contributions or such individual’s
political sponsorship or recommendation
https://www.chicago.gov/city/en/depts/dhr/supp_info/shakman_ settlement.html
CDA Code of Conduct | 35
Charitable
Activities
What do City employees need to know? What do CDA employees need to do? • City employees have a fiduciary duty to the City and must give their undivided loyalty to the City. If they serve as a Board or staff member of an outside organization, their fiduciary duty to the City must always come first
• City employees are prohibited from representing or receiving any compensation or income for representing any person
other than the City in any non-ministerial transaction or proceeding before a City agency • City employees who file annual Statement of Financial Interests with the Board of Ethics must disclose their outside Board service
• City employees who are interested in serving for non-profit organizations that have or want to have business transactions with the City are advised to consult with the Board of Ethics for a confidential advisory opinion
• CDA employees must comply with all City restrictions and CDA departmental rules that govern their non-City activities or outside volunteer services
• CDA employees must report their outside volunteer services with any organization to the CDA department head if
the organization has or will be applying for City transactions There are City of Chicago and CDA restrictions
and rules that govern the non-City activities and
outside volunteer services of CDA employees.
Your outside volunteer activities must be free from
any possibly conflicting duties that you owe to other
persons or organizations.
City of Chicago, Department of Ethics (Dec. 30, 2019),
https://www.chicago.gov/city/en/depts/ethics.html
CDA Code of Conduct | 36
VII. HEALTH AND SAFETY
The City of Chicago and CDA are committed to maintaining a safe, healthy and productive work environment for all of its employees by identifying prohibited conduct, setting and enforcing standards, and by providing training, outreach, education and assistance as needed. In order to help maintain a safe and healthy work environment, the City has established a drug and alcohol testing policy and violence in the workplace policy which applies to CDA employees and volunteers. CDA takes these policies seriously and expects all CDA employees and volunteers to fully comply with them. This section provides information about the City’s Drug and Alcohol Testing Policy, Employee Assistance Program and the City’s Violence in the Workplace Policy.
CDA Code of Conduct | 36
37 Health and
Safety
38 Drug Free
Workplace
40 Violence in
the Workplace
CDA Code of Conduct | 37
What do I need to know? What services are provided to CDA employees under the City’s EAP?
• The City may require testing of an employee for whom there is a reasonable suspicion that the employee has used
drugs or alcohol or is under the influence of drugs or alcohol while at work, on City property or on City business. Any employee who tests positive for drugs and/or alcohol use and refuses to cooperate with testing procedures will
be terminated
• CDA employees must notify CDA human resources of
any criminal drug statute conviction for a violation occurring in the workplace no later than 5 days after the conviction • CDA recognizes drug dependency as an illness. CDA also recognizes drug abuse as a potential health, safety and security problem. The City has an EAP which employees
are encouraged to use, as appropriate
• Under the Occupational Safety and Health (OSHA) Act,
employers are responsible for providing a safe and healthy workplace.
• CDA contractors and subcontractors must fully comply with all applicable OSHA standards, including the requirement to keep their workplace free of serious recognized hazards • EAP provides help to City employees who experience personal difficulties, including drug or alcohol problems
• Use of the EAP by City employees is voluntary and confidential • CDA employees are encouraged to seek assistance from
the EAP before alcohol or drug use interferes with their job performance and leads to disciplinary action. An employee’s decision to utilize the EAP will not be used as the basis for disciplinary action
• Participation in the EAP will not preclude discipline, nor will it be a defense to disciplinary action where the information leading to the adverse employment action was gathered from sources other than the EAP
CDA is committed to maintaining a safe, healthy
and productive work environment for all of its employees. The unlawful manufacturing, distribution, dispensation, possession or use of a controlled
substance or of an intoxicating substance on
CDA premises or while conducting CDA business
is absolutely prohibited. CDA employees who are
dependent on drugs and/or alcohol are encouraged to seek assistance from the City’s Employee Assistance Program (EAP).
Health and
Safety
City of Chicago, Personnel Rules (November 18, 2010), https://www. chicago.gov/content/dam/city/depts/dhr/supp_info/Personnel_Rules_ Revised11_26_2010.pdf
CDA Code of Conduct | 38
What do I need to know? The City may require drug/alcohol testing in the following situations:
• City employees are prohibited from consuming, being
under the influence of, or impaired by alcohol, cannabis or any illegal drug during work, including meals and
breaks or at any time while on City property or while
performing City services
• City employees are prohibited from possessing,
manufacturing, using, selling and/or transferring alcohol, cannabis or any illegal drug during work, including
meals and breaks or at any time while on City property
or while performing City services
• The illegal or unauthorized use of prescription drugs by City employees during work, including meals and breaks or any time while on City property or while performing City services is prohibited
• If a City employee is called to work during the employee’s typical “off-duty” time, the employee may report to work only if they have not consumed alcohol or cannabis at any time during the previous four (4) hours. When a City
employee has used alcohol or cannabis during the four (4) hours prior to being called to duty, they must acknowledge such use at the time they are called
• Employees who are covered by U.S. Department
of Transportation (“USDOT”) requirements under
the Federal Motor Carrier Safety Act are also subject
to the Drug and Alcohol Policy for DOT-covered
Employees of the City of Chicago
• Cannabis became legal in Illinois as of January 1, 2020.
Legalization in Illinois does not change or affect the City’s drug free workplace. Cannabis remains a Schedule I drug and is still illegal under federal law
Continues on next page
• Upon reasonable suspicion that the City employee has
used drugs or alcohol or is under the influence of drugs or alcohol while at work, on City property or on City business • When any City employee may have contributed to an
accident which results in significant injury requiring medical attention or significant property damage while at work, on City property or on City business
• When any City employee has been involved in a fight while at work, on City property or on City business
• As part of the return to work process for City employees in safety-sensitive positions
• As part of the pre-employment for City job applicants and/or pre-placement process for City employees
A City employee under the influence of drugs
or alcohol on the job can be a serious safety
risk to themselves, other City employees and the
general public. In order to guard against drug and
alcohol related safety risks, the City of Chicago
has established a drug and alcohol testing policy
which applies to all CDA full-time, part-time,
and temporary employees (including seasonal
employees), and volunteers. The policy also covers
applicants for safety-sensitive positions where drug
and alcohol testing is part of the pre-employment
process.
Drug Free
Workplace
City of Chicago Personnel Rules, Drug and Alcohol Policy (Dec. 30, 2019), https://www.chicago.gov/content/dam/city/depts/dhr/supp_info/ HRpolicies/2014_PERSONNEL_RULES-FINAL_2014_v3.pdf
CDA Code of Conduct | 39
What do I need to know? (Cont.)
• City employees may not refuse to cooperate with testing procedures or refuse to submit to drug and/or alcohol testing.
If you are a CDA employee and are unsure if you are covered by federal DOT regulations that require mandated drug and alcohol testing, contact CDA’s HR Liaison
• City employees who test positive for drugs and/or alcohol, including cannabis, may be subject to discipline, up to and including termination
• City employees will be afforded an opportunity to contest the basis of a positive test result for cannabis. If there is a reasonable belief that you were impaired at work, you may be subject to discipline, up to and including termination • Questions from CDA employees regarding the revised and updated City’s Drug and Alcohol Policy should be directed to CDA’s HR Liaison
Drug Free
Workplace
(Cont.)
CDA Code of Conduct | 40
Violence in
the Workplace
What do I need to know? What conduct is prohibited?
• Violence means any of the following conduct
○ Use of physical force against a person or persons
or the person’s property
○ Direct or implied threats that create a reasonable
fear of harm to a person or the person’s property
○ Communications made verbally, electronically or in
writing that create a reasonable fear of harm to a
person or persons or the person’s property and/or
○ Use or possession of any weapon, unless,
the specific weapon is authorized by the City for
a particular work assignment
• Weapon means any object or substance utilized to threaten or cause harm to another person. Employees who hold
a duly-issued Illinois concealed carry permit are required to comply with this Policy
• An employee who obtains an order of protection related to domestic violence that may encompass City premises should notify their supervisor and the departmental Violence in the Workplace Liaison. Employees may request leave time or accommodations related to domestic violence
• City employees who experience violence perpetrated by members of the public should report such conduct to the appropriate law enforcement agency. Also, CDA employees should comply with CDA incident reporting procedures
• City employees should promptly raise concerns about
potentially violent situations. Complaints of violent conduct must be made no later than sixty (60) calendar days after the date on which the alleged violent conduct occurred
• Any employee who knowingly makes a false accusation of violence or retaliation or knowingly provides false information in the course of an investigation, may be subject to discipline • City employees found to be in violation of this Policy will be subject to discipline, up to and including discharge
• Violence (as defined herein)
• Retaliation against any employee who asserted their rights by engaging in making a good faith complaint of violence in the workplace or participating in an investigation of violence.
Actions which may be considered retaliatory include, but are not necessarily limited to, denial of a promotion, demotion, suspension or discharge
• City employees impacted by domestic violence are encouraged to seek available resources and to advise City personnel and law enforcement as appropriate
The City of Chicago’s Violence in the Workplace
Policy is intended to provide guidelines for reporting and investigating violent conduct committed by City employees and for taking appropriate
remedial action. The Policy applies to volunteers
and employees of the City whether paid or unpaid.
The Policy is implemented and enforced by the
Diversity and Equal Employment Opportunity
Division of the Department of Human Resources
(“DHR”).
City of Chicago Violence in the Workplace Policy: https://www.chicago. gov/content/dam/city/depts/dhr/supp_info/HRpolicies/VIW_POLICY_ REVISION_FINAL_02-01-17.pdf
VIII. INFORMATION SECURITY
AND INFORMATION TECHNOLOGY
In order to effectively conduct the City of Chicago’s business and operations, the City makes available to authorized employees and third parties various information technology resources, including email, the City’s Intranet, the Internet and other communication and productivity tools. The use of these resources is intended for business purposes in accordance with the users’ job functions and responsibilities, with limited personal use permitted only in accordance with the City’s Ethics Ordinance, personnel rules, the City’s Information Security Policy, Social Media Policy and other applicable City policies. This section provides information about the City’s Information Security Policy and information security program, as well as the responsibilities of information users, including City employees, City contractors and other authorized persons. It also provides information about Sensitive Security Information, under the federal regulations that must be protected and The Illinois Local Records Act, which includes the procedure by which City employees may destroy public records. In addition, this section provides an overview of the City’s Social Media Policy and gives examples of prohibited communications.
CDA Code of Conduct | 41
42 Information
Security
Policy
44 Sensitive
Security
Information
48 Social Media
Policy
46 The Illinois Local
Records Act and the
Illinois Freedom
of Information Act
CDA Code of Conduct | 42
Information
Security Policy
What do I need to know? Who is responsible for the City’s information security program?
The City of Chicago’s Information Security Policy
defines the governing principles for the secure
operation and management of the information
technology used, administered and/or maintained
by the City and for the protection of the City’s information assets.The purpose of the policy is to: define the responsibilities of the City’s officers, employees, agents, departments, commissions, boards, offices
and agencies with respect to the appropriate use
and protection of the City’s information assets and
technology; and ensure that the City’s information
assets and technology are secure from unauthorized
access, misuse, degradation or destruction. The
City’s Information Security Policy applies to CDA, its
employees and CDA vendors.
• City employees and contractors must maintain the
confidentiality of their user credentials. They cannot allow unauthorized persons to use their network account,
email address or other City-provided computer facilities • City employees and contractors cannot use City-provided Internet or Intranet access or the City’s confidential or internal information to solicit or conduct any personal commercial activity
• City employees and contractors cannot make statements on behalf of the City or disclose confidential or internal City information unless expressly authorized in writing by their department management
• City employees and contractors must protect confidential or internal information being transmitted across the Internet or public networks
• Internal information, such as email lists, must not be posted to any external information source without the prior written consent of the department’s management
• City employees and contractors must not install software on the City’s network and computer resources without
prior written permission from the City’s Department of
Innovation and Technology
Continues on next page
• The City’s Department of Innovation and Technology is responsible for designing, implementing and maintaining a City-wide information security program, in conjunction
with other departments and for assisting all City departments, agencies, offices, boards and commissions in implementing and maintaining information management practices
• The City’s Chief Information Officer is responsible for compliance and enforcement activities associated with the City’s Information Security Policy, and is responsible for the overall security of information assets and technology at the City
• The Information Security Office is responsible for driving daily activities and enforcement, managing and directing the
City-wide information protection program, and coordinating the review of risks and security implications associated with the use of all technologies within the City’s operating environment
City of Chicago Department of Technology and Innovation, Information Security and Technology Policies (2014-1020), https://www.chicago. gov/content/dam/city/depts/doit/supp_info/IS%20and%20IT%20Polices/ CoC_IT_IS_Policy_Set_ver_RC_05.pdf
CDA Code of Conduct | 43
Information
Security Policy
(Cont.)
What do I need to know? (Cont.)
• City employees and contractors must not copy, alter,
modify, disassemble or reverse engineer the City’s
authorized software or other intellectual property in
violation of licenses provided to or by the City. They
may not download, upload or share files in violation
of U.S. patent, trademark or copyright laws
• City employees and contractors must not access the
Internet, the Intranet or email to use, upload, post, mail, display or otherwise transmit any content, communication or information for inappropriate uses
• City employees and contractors must report suspected
security violations to the Information Security Office
• City employees and contractors must adhere to corporate information security policies, standards and technical
controls
• City employees and contractors must use City
information resources responsibly and for authorized
purposes only
CDA Code of Conduct | 44
Sensitive
Security
Information
What do I need to know? What are examples of SSI that may be encountered at CDA?
Under the federal regulations, Sensitive Security
Information (“SSI”) is defined as information
that would be detrimental to transportation
security, if publically released. TSA stakeholders,
non-Department of Homeland Security (“DHS”)
government employees and contractors are considered “covered persons” under the federal SSI regulations and have special obligations to protect this information from unauthorized disclosure.
Although SSI is not classified information, there
are specific procedures for recognizing, marking,
protecting, safely sharing, and destroying SSI.
CDA itself, and some of its contractors and concessionaires, as well as the airlines, are considered “covered persons” under the regulations. CDA and its
business partners have special obligations to protect
SSI from unauthorized disclosure. Only employees
who have a “need to know” the information in order
to carry out their official duties may receive SSI,
and they are obligated to take the required steps to
protect it. Employees who do not have a “need to
know” the information must not access it. Violation of
the obligations is grounds for civil penalty and other
enforcement or corrective action by DHS.
• SSI is information about transportation security activities that would be detrimental to security if released. If you are unsure if material constitutes SSI, check with your supervisor for guidance
• Don’t share SSI with individuals who do not have a
need to know the information
• SSI must be stored in a secure container such as a locked file cabinet or drawer
• SSI must be marked. Even when only a small portion
of a paper document contains SSI, every page of
the document must be marked with the SSI header
and footer – as indicated below. Alteration of the
footer is not authorized
○ Header - Sensitive Security Information
○ Footer - WARNING: This record contains
Sensitive Security Information that is controlled
under 49 CFR parts 15 and 1520. No part of
this record may be disclosed to persons without
a “need to know,” as defined in 49 CFR parts
15 and 1520, except with the written permission
of the Administrator of the Transportation Security
Administration or the Secretary of Transportation.
Unauthorized release may result in civil penalty
or other action. For U.S. government agencies,
public disclosure is governed by 5 USC 552
and 49 CFR parts 15 and 1520
• SSI must be destroyed when no longer needed to
preclude recognition or reconstruction of the information Continues on next page
• Security programs and security contingency plans, such as security incident response plans
• Security directives or orders issued by DHS/TSA or USDOT • Information circulars issues by DHS/TSA or USDOT
regarding threats to aviation
• Performance specifications and test procedures for
detection devices (such as x-ray machines, scanners,
explosive sniffers, motion detectors) and communications equipment used in carrying out security measures
• Security vulnerability assessments
• Security inspection or investigative information of an alleged violation of security
• Threat information
• Specific details of security measures and protocols
• Security screening procedures and information including screening selection procedures, security screener tests and scores, performance testing, any electronic image shown on any screening equipment monitor, and if identified as SSI by TSA, detailed information about locations where certain equipment and procedures are used
• Security training materials
Continues on next page
Code of Federal Regulations, 49 C.F.R. part 1520. https://www.govinfo. gov/content/pkg/CFR-2011-title49-vol9/pdf/CFR-2011-title49-vol9- part1520.pdf
Sensitive
Security
Information
(Cont.)
What do I need to know? (Cont.)
• Any document marked as SSI must be handled as SSI
until there is a determination that it is not SSI and the marking removed
• If you become aware of SSI materials that are improperly secured, immediately notify the person who should
have custody of those materials or your supervisor. Examples of improperly secured materials include materials marked as SSI that are left unattended in a break room or discarded in a copy room trashcan
What are examples of SSI that may be
encountered at CDA? (Cont.)
• Identifying information of certain transportation
security personnel, which includes lists of names of
personnel (including non-security personnel) who
have unescorted access to a secure area of an airport
• Other information that DHS/TSA or USDOT determines
is SSI
CDA Code of Conduct | 45
CDA Code of Conduct | 46
The Illinois
Local Records
Act and the
Illinois Freedom
of Information
Act
What do I need to know? What are some examples of a
public record?
CDA employees and contractors are subject
to Illinois laws that dictate how public records
are preserved and how they are made public upon
request. The Illinois Local Records Act requires
local governments, including the City of Chicago,
to keep public records and it outlines the procedure
by which they may destroy public records. The Act
provides procedures related to where the records
must be kept, who is responsible for them, how
long they must be kept, how records are to be managed, the Freedom of Information Act, how to obtain a copy of records, the cost associated with getting
records, the process for disposing a public record,
and what happens if a public body destroys a record
without permission. Under the Illinois Freedom of
Information Act, records in possession of CDA may
be accessed by the public upon written request.
There are several exemptions to this general rule,
allowing CDA to withhold part or all of a document
for certain reasons.
• The Illinois Local Records Act requires that all public records be retained by City departments indefinitely,
unless the department obtains approval from the State
to destroy them. Getting that approval is a multi-step
process
○ CDA must work with the State to come up with
a “Record Retention Schedule” that provides
timeframes for keeping types of records. For
example, it might say that invoices must be
kept for 10 years and memos must be kept for
5 years
○ CDA must verify to the State that the record
is not still needed for legal, business, fiscal or
historic reasons once the specified amount
of time has passed. Only then can the record
be destroyed. CDA employees cannot dispose
of any records that they create or receive in
the course of doing their job. Instead, they must
all be saved, and sent to storage if they are
done using them
○ You are allowed to dispose of extra copies of
documents that you have already saved, provided
they do not have any additional notations on them
Continues on next page
• A public record is any document, whether in hard copy or electronic form, that is created or received in the course of performing City business. Public records include
○ Paper
○ Map
○ Photograph
○ Born-digital electronic material
○ Digitized electronic material
○ Electronic material with a combination of
digitized and born-digital material or
○ Other official documents, regardless of physical
form or characteristics, made, produced, executed
or received by any agency or officer in the course
of performing City business
• The definition of a public record is very broad and
essentially covers all records that a City employee deals with at work. The determining factor is whether the
record “pertains to public business”
• Examples of public records include
○ Memos
○ Emails
○ Spreadsheets
○ Items sent to City contractors or the public
○ Text messages
○ Meeting notes
○ Audit reports
○ Management letters
○ Documents with the use of public funds by local
governments
The Illinois Local Records Act, 50 ILCS 205/s et seq., Continues on next page The Illinois Freedom of Information Act (5 ILCS 140)
CDA Code of Conduct | 47
The Illinois
Local Records
Act and the
Illinois Freedom
of Information
Act (Cont.)
What do I need to know? (Cont.)
• The Illinois Freedom of Information Act requires that all public records be released to the public upon request ○ There are several exemptions to this general
rule which allow the City to withhold part or
all of a document for certain reasons, including if
it contains attorney/client privilege, personal
information or if it is a draft. CDA’s FOIA Officer
and attorneys will make that determination
○ The City has only 5 business days to respond
to a FOIA request. If you are contacted by
the FOIA Officer because your records have
been requested under FOIA, you must promptly
gather them and give them to the FOIA Officer
○ A good rule of thumb for creating public records
(such as emails) is: “Don’t put it in the document
if you don’t want to see it on the cover of the
Sun-Times or Tribune!”
• If a public body destroys a record before its retention period is up and without notifying the Local Records
Commission, it is considered a Class 4 felony that the
State’s Attorney would investigate
• Because almost everything a City employee comes
across is a public record, employees should assume the
records they are handling are public records and treat
them accordingly
• All records created or received by a City contractor
while they are doing business with the City are also public records of the City
• Examples of records that are not public are
○ Newspapers
○ Books
○ Extra copies of the same document
○ Signs that provide information to employees,
such as signs letting them know that there are
donuts in the breakroom or that a bathroom is
out of service
What are some examples of a
public record? (Cont.)
CDA Code of Conduct | 48
Social Media
Policy
What do I need to know? What are examples of prohibited communications through official accounts?
The City of Chicago has a Social Media Policy.
The City utilizes multiple “on-line” channels to
communicate to its employees, business partners,
other government organizations, media outlets
and residents. Some examples of these channels
include, but are not limited to Facebook, Yahoo!,
Twitter, Blogs, YouTube, Instagram, TikTok and
any other site where texts, documents or multimedia files can be posted. Because these sites are also used by City employees and contractors
for personal reasons, the City requires that all
personal and official business postings be clearly
differentiated.
• City employees and contractors must adhere to all
laws, City ordinances and policies when participating in social media and avoid prohibited communications
• Social media communications in connection with the
transaction of public business should be posted solely
from a City-approved social media account and not
from a personal social media account unless approved
by the Mayor’s Office and department head
• City employees may include official City social media addresses and accounts on City documentation per internal department guidelines
• All official accounts must be managed by department Public Information Officers (PIOs) unless otherwise requested
by the department head. The PIO is in charge of posting content and monitoring the social media site
• Comments by City employees on official accounts should be considered part of the public record and should focus on highlighting and explaining the department’s mission.
Employees should not post comments that contain sensitive, personal or confidential employee information
• All official City websites and presences on social media sites are considered an extension of the City’s information networks and must be maintained in accordance to
City standards
Continues on next page
• Interferes with official City business
• Is hateful, harassing, threatening, libelous or defamatory, pornographic, profane or sexually explicit
• Is deemed by the City to offend persons based on race, ethnic heritage, national origin, sex, sexual orientation, age physical or mental illness or disability, marital status, employment status, housing status, religion or other characteristics that may be protected
• Impersonates a person, organization or business
• Enables or constitutes gaming, wagering or gambling
• Promotes or participates in unauthorized fundraisers
• Promotes or participates in partisan political activities • Promotes or participates in unauthorized advertising of City projects and any advertising of private projects
• Compromises or degrades the performance, security or integrity of the City’s technology resources and information assets • Contains a virus, logic bomb or malicious code
• Constitutes participation in chain letters, unauthorized chat rooms, unauthorized instant messaging, spamming
or any unauthorized auto-response program or service
City of Chicago, Department of Innovation and Technology, Social Media Policy (Dec. 30, 2019) https://www.chicago.gov/city/en/depts/ doit/supp_info/is-and-it-policies.html
CDA Code of Conduct | 49
Social Media
Policy
(Cont.)
What do I need to know? (Cont.)
• All sites must follow the City and State data retention requirements. Posts that are made to these sites
are considered public records and must be preserved
pursuant to the Illinois Local Records Act
• All City’s Ethics Rules, Acceptable Use of Assets, Codes of Conduct, Personnel Rules and any other regulations
governing the conduct of City employees apply equally to all social media postings
IX.ENFORCEMENT PROCEDURES
The CDA Code of Conduct covers many types of possible conduct by CDA employees, City contractors and their subcontractors, as well as others. We encourage all CDA employees and contractors to review this Code of Conduct very carefully and make every effort to comply with it at all times. Violations of the Code of Conduct will be taken seriously by CDA. This section summarizes how CDA’s regulatory and enforcement procedures work. It does not include the enforcement procedures in connection with investigations conducted by the Office of the Inspector General (OIG) or the sister agencies of the City and/or regulatory actions commenced by the Board of Ethics which also has the authority to track, investigate and impose penalties. This section provides information about the OIG whose mission is to promote economy, effectiveness, efficiency, and integrity in the administration of programs and operation of City government. OIG has oversight of all City employees and elected officials, including the Mayor, Aldermen, City Clerk and the City Treasurer, as well as, appointed officials, CDA employees and City contractors.
CDA Code of Conduct | 50
51 Reporting
Concerns and
Penalties
55 Suspension and
Debarment
57 Upholding These
Standards
53 Office of
Inspector General
(OIG)
CDA Code of Conduct | 51
Reporting
Concerns and
Penalties
What do I need to know? What are possible penalties for noncompliance?
Public service is a public trust. We all need to be
diligent and committed to reporting any concerns
or violations of the Code of Conduct as soon as
they arise. Every CDA employee and contractor
is required to report, directly and without undue
delay, alleged violations of this Code of Conduct.
Depending on the concern and/or alleged violation, CDA will determine whether an investigation is necessary, conduct an investigation if it decides
one is necessary, and afford the subject of the investigation an opportunity to respond. CDA may also refer the matter to the Board of Ethics and/or
the Office of the Inspector General (OIG). Severe
penalties could be imposed for findings of misconduct by CDA, the Board of Ethics and/or OIG, up to discharge and suspension or debarment from City
contracting.
• Persons have an affirmative duty to promptly report serious concerns, all misconduct and violations of the Code of Conduct to the CDA department head and/or her designee and/or the OIG
• Any and all misconduct pertaining to City procurement should be promptly reported to the OIG
• The Antitrust Division of the U.S. Department of Justice is responsible for investigating and prosecuting crimes associated with procurement such as price fixing and bid rigging
• Any CDA employee, volunteer or applicant for City employment who believes that they have been discriminated against or harassed or who claims to have suffered retaliation, should report the conduct to the CDA EEO Liaison and file a
complaint with DHR
• CDA employees should report workplace harassment, sexual harassment and bullying to their supervisor. Complaints of sexual harassment committed by a City elected official will be reported by CDA to the Board of Ethics or to the OIG
• Any CDA employee who knowingly makes a false accusation of noncompliance or knowingly provides false information, may be subject to discipline, up to and including discharge • CDA employees may also contact the Board of Ethics for confidential advice or guidance at: (312) 744-9660 (telephone); (312) 744-5996 (TTY); and (312) 744-2793 (facsimile)
• The CDA Code of Conduct includes many of the restrictions in the Ethics Ordinance. The Board of Ethics has the sole authority to determine whether violations of the Ethics Ordinance have occurred and can impose or recommend
penalties, including fines, employment sanctions, removal from office, censure or invalidation of contracts. Possible penalties are listed below
• Contracts negotiated, entered into or performed in violation of the Ethics Ordinance are voidable as to the City
• Permits, licenses, rulings, determinations or other official actions of CDA or another City agency applied for, sought, obtained or undertaken in violation of the Ethics Ordinance are invalid and without any force or effect
• Employees who violate the Ethics Ordinance are subject to fines and employment sanctions, including discharge
• City officials who violate the Ethics Ordinance are subject to removal from office
• There are severe penalties for CDA employees who violate the City’s post-employment restrictions. Any contract negotiated, entered into or performed in violation of the restrictions can be voided by the City. Violators can be fined up to $2,000 per offense
• Any person who violates the City’s gift restrictions or engages in prohibited political activities will be subject to a fine of not less than $1,001.00 and not more than $5,000.00 for each violation
Continues on next page
City of Chicago, Office of the Inspector General (Dec. 30, 2019), https://www.chicago.gov/city/en/depts/igo.html
CDA Code of Conduct | 52
Reporting
Concerns and
Penalties
(Cont.)
What are possible penalties for
noncompliance? (Cont.) • Any person who knowingly makes, solicits or accepts a political contribution shall be subject to a fine of not less than $1000 and up to the higher of $5000 or three times the amount of each improper contribution. If such person is a City contractor, they will be subject to contract termination
• Any person who intentionally makes a false, frivolous or bad faith allegation to the Board of Ethics shall be fined not less than $500.00 and up to $5,000.00 for each offense, and if such person is a City contractor, will be subject to contract termination • Any person who knowingly makes a false statement of
material fact to the City in violation of any statute, ordinance or regulation or who knowingly falsifies any statement of material fact, is liable to the City for a civil penalty of not less than $500 and not more than $1,000, plus up to three times the amount of damages. The person will also be liable for the City’s litigation and collection costs and attorney’s fees • Any person who knowingly makes, uses or causes to be
made or used, a false record or statement to conceal, avoid or decrease an obligation to pay or transmit money or property to the City, is liable to the City for a civil penalty of not less than $5,000 and not more than $10,000, plus three times the amount of damages. The person will also be liable to the City for the attorney’s fees and costs of a civil action brought to recover any such penalty or damages
• The City’s Corporation Counsel may bring a civil action against any person who has violated or is violating the Chicago False Claims Act
• Persons who violate any other provision of the Code of Conduct and/or the Ethics Ordinance are subject to a fine between $500 and $2,000 for each offense
CDA Code of Conduct | 53
• The OIG receives and registers complaints and
information concerning misconduct, inefficiency
and waste within City government. The OIG
may be contacted anonymously by telephone at
866-IG-TIPLINE (866/448-4754) and online at
www.chicago-inspectorgeneral.org
• The OIG investigates the performance of governmental
officers, employees, functions and programs, in order
to detect and prevent misconduct, inefficiency and waste • The OIG promotes economy, efficiency, effectiveness
and integrity in the administration of the programs
and operations of the City government by reviewing
programs, identifying any inefficiencies, waste
and potential for misconduct, and recommending to
the Mayor and/or City Council policies and methods
for the elimination of inefficiencies and waste, and
the prevention of misconduct
• The OIG reports to the ultimate jurisdictional authority concerning results of investigations, audits and program reviews
• The OIG may request information related to
an investigation, audit or program review from
any employee, elected or appointed officer,
department, agency, contractor, subcontractor,
agent or licensee of the City, and applicant for
certification eligibility for a City contract or program Continues on next page
Office of
Inspector
General (OIG)
What do I need to know? What are the different sections of the OIG and what do they do?
• Audit and Program Review - evaluates the effectiveness and efficiency of the operations of City’s agencies and programs
• Investigations - conducts investigations into allegations of criminal activity, fraud, waste and abuse
• Hiring Oversight - reviews, monitors and audits key
activities and processes under the City’s court-ordered hiring plans
• Public Safety - conducts inspections, evaluations and reviews of operations and actions of the Chicago Police Department, the Civilian Office of Police Accountability and the Chicago Police Board
• Legal - provides legal counsel to each section of the OIG • Center for Information Technology and Analytics -
provides technical forensic and data analytical services, and manages OIG’s structural and operational IT
infrastructure
OIG is an independent, nonpartisan, oversight
agency of the City of Chicago. OIG conducts
administrative and criminal investigations, audits
City programs and operations, and reviews City
programs, operations and policies. From these
activities, OIG issues reports of findings and
recommendations that are intended to ensure
that City officials, employees, and vendors are
held accountable for the provision of efficient,
cost-effective, government operations. OIG investigatory files and reports are confidential. https://www.chicago.gov/city/en/depts/igo.html
CDA Code of Conduct | 54
• CDA employees, contractors and subcontractors are
required to fully cooperate with the OIG and promptly
respond to the OIG’s reasonable requests for information • The OIG conducts public hearings at its discretion
• The OIG administers oaths and examines witnesses
under oath
• The OIG issues subpoenas to compel the attendance
of witnesses for purposes of examination and the production of documents and other items for inspection and/or
duplication
• The OIG exercises powers or duties with respect to sister agencies of the City pursuant to applicable intergovernmental agreements
• The OIG promulgates rules and regulations for the conduct of investigations and public hearings
• The OIG receives and addresses complaints of sexual
harassment
Office of
Inspector
General (OIG)
(Cont.)
What do I need to know? (Cont.)
CDA Code of Conduct | 55
Suspension
and Debarment
What are causes for the debarment
of City contractors, subcontractors and
suppliers?
What are some examples of
improper conduct?
Debarments are discretionary actions by the City
of Chicago and/or its Chief Procurement Officer
(CPO) to effectuate the procurement policies of
the City. The serious nature of debarment requires
that the City impose these sanctions only in the
public interest and not for purposes of punishment.
A CDA contractor’s debarment will apply to all City
contracts, unless otherwise stated by the CDA department head and CPO. A debarred vendor may also be debarred from participating in any City
contract as a subcontractor or supplier of any tier.
Depending on the cause for debarment, City contractors could be debarred from contracting with the City for a lifetime. There are several causes that
could result in a City contractor’s debarment from
City contracting.
• Conviction of or civil judgement for
○ Fraud in connection with a City contract or subcontract ○ Violation of Federal or State statutes relating to the submission of bids, proposal or claims
○ Commission of embezzlement, theft, forgery, bribery,
falsification or destruction of records, making false
statements, tax evasion or receiving stolen property
○ Conduct indicating a lack of truthfulness, veracity
or honesty that affects the responsibility of the vendor • Violation of the terms of a City contract or subcontract including ○ Willful failure to perform in accordance with the contract ○ History of failure to perform
○ History of unsatisfactory performance
○ History of failure to meet DBE/MBE/WBE/BEPD
obligations
• Making any false, deceptive or fraudulent material statement in any bid, proposal or application for City or any government work or application for any permit or license
• Making any false, deceptive or fraudulent material statement in any application to obtain, expand or continue certification as a DBE/MBE/WBE/BEPD
• Refusal to cooperate with reasonable requests of City inspectors, representatives or other City personnel with respect to work under contract provisions
Continues on next page
• Intentional or negligent billing irregularities
• Submitting false or frivolous or exaggerated claims, documents or records
• Falsification of claims, documents or records
• Destruction of documents or records
• Bribery or coercion of a government official
• Falsely claiming to be a DBE/MBE/WBE/BEPD or to be
eligible for the Chicago Business Preference or any other bidding preference or protected market program
• Seeking DBE/MBE/WBE/BEPD credit for the contract
participation of DBE/MBE/WBE/BEPDs which are not
performing a commercially useful function
• Failing to pay any judgment or other adjudicated debt owed to the City
• Failing to defend, indemnify or hold harmless the City pursuant to a contractual obligation
City of Chicago, Department of Procurement Services (Dec. 30, 2019), https://www.chicago.gov/city/en/depts/dps/provdrs/debarred_firms_list. html
What are causes for the debarment
of City contractors, subcontractors and
suppliers? (Cont.)
CDA Code of Conduct | 56
Suspension
and Debarment
(Cont.) • Founding, establishing or operating an entity in a manner to evade City, State, County and federal statutes, rules or regulations
• Improper conduct
• Any other cause so serious or compelling in nature that it affects the responsibility of the vendor
• Debarment by any other government agency
CDA Code of Conduct | 57
What do I need to do?
• You are expected to uphold the standards in the CDA Code of Conduct • Read, understand and comply with the Code of Conduct, and related Federal, State, and City laws, regulations and policies • Be committed to the highest standards of professionalism, trust, ethics, and responsibility at all times during the performance of your responsibilities for the City of Chicago and CDA • Foster an working environment of diversity and inclusion which values the participation and work of all of our employees, contractors and subcontractors
• Speak up when you see possible violations of the Code of Conduct, City laws, and other legal and regulatory requirements
• Don’t hesitate to consult with your supervisor or the appropriate persons if you have any questions or concerns • Be truthful and cooperate fully in any investigations. Do not conceal information or destroy documents • Participate in training on the Code of Conduct, and attest that you understand and commit to comply with it Who are CDA’s leadership point of contacts regarding the Code of Conduct? Jamie L. Rhee
Commissioner
Chicago Department of Aviation
[email protected]
(773) 686-8060
Elizabeth Granados-Perez
Managing Deputy Commissioner
Chicago Department of Aviation
[email protected]
(773) 686-3731
Upholding
these
Standards
In order for CDA to continue to fulfill its core
mission and achieve its goals as a global leader,
each of our employees and vendors must be fully
committed to high professional and business
standards at all times. We must each learn, understand and comply with our Code of Conduct. It is the central guide regarding our core values, vision
and standards of conduct. Complying with our
Code of Conduct is about creating an environment
where we all do our best work and are proud of the
work we do, the challenges we overcome and the
successes we achieve together – all because we
do these things fairly, legally and with integrity.
*This Code of Conduct is intended as a reference to educate and serve as a resource for current employees and vendors, to assure that all employees and vendors of the Chicago Department of Aviation (“CDA”) perform their work and conduct business with honesty and integrity.
Employees and vendors are expected to know the policies and guidelines contained in this Code of Conduct, as well as any additional and/ or new policies and guidelines set by the CDA. If there is a discrepancy or omission, the current official statute, ordinance, regulation, rule, policy, or respective collective bargaining agreement governs, however, CDA rules will control where they are merely more restrictive but not contradictory.
The CDA reserves the right to change or modify the Code of Conduct at any time at the sole discretion of the CDA with or without prior notice.
Updated versions may be published on the CDA’s website from time to time.
EXHIBIT 6
EXHIBIT
Administered by
Presented By:
The Admin Circle
Anita J. Ponder | Partner
Dragomir A. Tsvetenov | Attorney
Welcome
CONSTRUCTION SUBCONTRACT AGREEMENTS
8/23/2022 2
Anita J. Ponder
Partner | Chicago Office
Dragomir A. Tsvetenov
Attorney | Chicago Office
Quintairos, Prieto, Wood & Boyer, P.A. www.QPWBLAW.com
Purpose of Legal Workshop
• To understand your contract rights and
obligations
• To demystify legal jargon and become
more familiar with subcontract
terms/conditions
• To improve your contract negotiations
• To mitigate your risk and potential liability
• To avoid contract breaches
• To enter into clear and beneficial
subcontract agreements that achieve your
business objectives
8/23/2022 3
Introduction
• Most popular standard forms contract is produced by
the American Institute of Architects (“AIA”)
• AIA publishes a wide range of contracts for small,
medium and large projects
• AIA documents cover a large variety of contract
types - including fixed-price, cost-plus and designbuild • Consensus Docs, Design Build Institute of America
and Engineers Joint Contract Documents Committee
publish the most common forms used
8/23/2022 4
Introduction (continued)
• These organizations draft the forms to protect the parties that they represent
• For example, AIA contracts favor owners and the
Association of General Contractors (“AGC”) publishes
a series of standard form contracts that tend to favor
contractors
• QPWB has analyzed the terms and conditions in these
forms to identify red flags for subcontractors
• Standard form contracts are typically amended by the parties during negotiation process to protect rights of both parties and better align the contract requirements with particular projects
8/23/2022 5
Introduction (continued)
• Subcontracting is permitted and frequently utilized - particularly on government contracts
• Subcontracting provides a way for contractors to reduce costs or to mitigate risk
• Risk is transferred through a subcontract
• Subcontracts can be easily terminated
• Subcontracts often contain “flowdown” provisions
that make subcontractor liable to contractor for same
things for which contractor is liable to owner
• Never sign subcontract prior to legal review
8/23/2022 6
• Definition of Contract Terms
• Contracting Clauses
• Performance of Work
• Contractor Obligations
• Subcontractor Obligations
• Insurance and Bonds
Topics Covered
8/23/2022 7
• Indemnification
• Changes and Claims
• Scheduling
• Payment
• Termination or Suspension
CONSTRUCTION SUBCONTRACT AGREEMENTS
Definition of Contract Terms
• This section is used to ensure that the parties are
in agreement about the meaning of contract terms
• Contractual term is any provision forming part of a
contract
• Each term gives rise to a contractual obligation
• Breach of contract term may result in litigation
8/23/2022 8
Contracting Clauses
• Vary from contract to contract - wide variety
• Common Clauses
• Choice of Law
• Statute of Limitations
• Time of Performance
• Non-Waiver
• Arbitration
• Assignment
• Confidentiality
8/23/2022 9
Contracting Clauses (continued)
• Common Clauses
• Consideration
• Entire Agreement/Complete Integration
• Force Majeure
• Indemnification
• Liquidated Damages
• Accelerations
• Exemption
• Exclusion
• Escalation
• Cancellation
8/23/2022 10
Contracting Clauses (continued)
• Common Clauses
• Penalty
• Sunset
• Exculpatory
• Non-Compete
• Severability
• Payment
• Notice
• Changes
• Termination
8/23/2022 11
Contracting Clauses Most Highly Modified & Scrutinized
• Payment
• Notice
• Changes
• Termination
• Indemnification
• Liquidated Damages
8/23/2022 12
Performance of Work
• Schedule of project
• Date of commencement/effective date of contract
• Schedule of work to be performed by trade
contractors on project
• Changes must be submitted promptly and
reasonably
• Extensions of time are permissible due to causes
beyond reasonable control of subcontractor
• Time is of the Essence
8/23/2022 13
Subcontractor Obligations
• Subcontractor should promptly submit shop
drawings, product data, samples and materials
• Subcontractor should submit a schedule of
values allocated to various parts of subcontract
work in detail
• Subcontractor should identify its Authorized
Representative
• Subcontractor should identify safety
precautions and procedures
• Subcontractor should warrant that its materials,
equipment and work are of good quality
8/23/2022 14
Insurance and Bonds
• Parties often procure multiple types of
insurance coverage
• Subcontractors are required to identify
their insurance coverage and limits of
liability
• Length of policy period can vary, but is
generally the anticipated length of the
project or the duration of the contract
period
8/23/2022 15
Insurance and Bonds (continued)
Types of insurance required may include:
• Liability or casualty insurance
• Builder’s risk insurance
• Surety bonds
• Worker’s compensation insurance
• Automobile liability insurance
• Commercial general liability
• Professional liability insurance
• Parties may procure other types of
insurance such as coverage for environment
and pollution exposure, land acquisition,
financing and zoning
8/23/2022 16
Indemnification
• Indemnity clause is one of the most
scrutinized, negotiated and litigated terms of
a construction contract
• Indemnity is a contractual obligation of one
party (indemnifier) to compensate the loss
incurred to the other party (indemnity
holder) due to the acts of the indemnitor or
any other party
• For example, it requires the contractor to
defend, reimburse and “hold harmless” the
owner and architect from claims and liability
arising out of the contractor’s work
8/23/2022 17
Changes & Claims
• Subcontract Change is any change within the
scope of the subcontractor’s work (ie, drawings,
specifications, technical requirements)
• Subcontract Change Order is a written agreement
prepared by the contractor and signed by
subcontractor of the change in scope of work, price
and/or time
• Claim is a written demand or assertion by
subcontractor seeking an adjustment in the price,
time, interpretation of subcontract terms or other
relief
8/23/2022 18
Scheduling
• If the subcontractor is delayed in its
performance of work beyond its
control, it should be entitled to an
extension of time to complete its
work
• Request by contractor to
accelerate the subcontractor’s work
should entitle the subcontractor to
a price increase
8/23/2022 19
Payment
• Payment terms should be clearly
defined
• Best practices - include schedule of
values that assigns a monetary
price to all items such that the total
of all items is equal to the
subcontract price
• Payment verification clauses are
handy for identifying what labor,
materials and equipment used will
be paid for by whom
8/23/2022 20
Payment (continued)
Subcontractor is required to furnish
certain items to contractor for
payment:
• Affidavit stating all payrolls, bills for material
and equipment, and other indebtedness have
been paid
• Consent of the subcontractor’s surety to final
payment, if necessary
• Certification that insurance required by the
subcontractor remains in effect beyond final
payment
• Other data as required by the contractor (i.e.,
receipts, releases and waivers of liens)
8/23/2022 21
Payment (continued)
• Subcontractors should request
provisions for progress payments and
define clear terms for applications of
payment
• Subcontracts should define a payment
procedure defining how and when the
subcontractor will be paid
• Subcontracts should include remedies
for nonpayment that clearly define
penalties for late payments
8/23/2022 22
Payment (continued)
• Subcontractor should provide partial lien or
claim waivers in the amount of the application
for payment and subcontractor affidavits
• Waivers may be conditioned upon payment
• Subcontractor should not sign an
unconditional waiver of lien or claim prior to
receiving the payment or in an amount in
excess of what it has been paid
• Retainage between 5% and 10% (or higher)
may be withheld for a portion of the final
payment for a defined period of time
8/23/2022 23
Termination or Suspension of Subcontract
• Subcontract may be terminated by
contractor if subcontractor persistently
and/or repeatedly fails or neglects to
carry out the work after receiving
written notice to commence and correct
default, neglect or breach
• Subcontractors most often terminate
subcontract because their work has
stopped for thirty (30) calendar days
due to lack of progress payments when
required by contract
8/23/2022 24
Termination or Suspension of Subcontract
• Subcontractors may terminate
subcontract because the work is
suspended for an unreasonable period
of time without a legally sufficient
excuse
• Contractor may order subcontractor to
suspend, delay or interrupt the work
for such period of time as may be
determined appropriate for the
convenience of the contractor
8/23/2022 25
(Continued)
Conclusion
• COVID-19 continues to impact
construction industry
• Supply chain shortages
• Shortage of skilled labor
• Reason to be optimistic – President Biden
signed $1 trillion Infrastructure Investment
and Jobs Act in November 2021
• Influx of federal money into State and local
infrastructure projects
• Many subcontracting opportunities for
small, disadvantaged, minority and
women-owned businesses
8/23/2022 26
Conclusion (continued)
• Mitigate your risk and potential liability by
entering into a good subcontract agreements
• Carefully review your subcontract
agreements
• Always ask your legal counsel to review
agreement before you sign it
• Legal support is provided to small businesses
by the Illinois Tollway via its Technical
Assistance Program which is facilitated by
Team Inner-City
• Encouraged to contact us directly to review
your construction subcontract agreements
8/23/2022 27
How To
Contact Us Question & Answers
8/23/2022 28
Director – Government Contracts
Anita J. Ponder
Partner | Chicago Office
[email protected]
Cell: (312) 504 - 8338
Dragomir A.
Tsvetenov
Attorney | Chicago Office
[email protected]
Cell: (831) 277 - 0943
Quintairos, Prieto, Wood & Boyer, P.A.
www.QPWBLAW.com
THANK YOU!
8/23/2022 29
EXHIBIT
38 | THE PRACTICAL LAWYER FEBRUARY 2022
ANITA PONDER is a partner at the national law firm of Quintairos, Prieto, Wood & Boyer, P.A. (QPWB) in its Chicago office. She heads QPWB’s Government Contracts Practice and spearheads the firm’s “QPWB Small Business Certification Initiative” to assist small businesses with obtaining their certification eligibility. QPWB is the largest minority- and women-owned law firm in the nation with approximately 400 attorneys in 27 offices. Ms. Ponder brings to QPWB extensive legal and consulting experience in government procurement and contracting, bidding, contract compliance, and supplier diversity.
Ms. Ponder has more than 30 years of experience providing legal services, consultation, strategic guidance, training, and advocacy to government contractors, including industry leaders that are large, mid-sized, family-owned and small businesses that are disadvantaged, minority, women and veteran-owned businesses. She has also served as legal counsel to several state and local governmental agencies, including public housing authorities on Section 3 business matters.
Ms. Ponder has been one of the nation’s most effective advocates of supplier diversity in the public and private sectors.
She has received a number of awards for her outstanding legal accomplishments. Preceding private practice, Ms. Ponder served as the Director of Certification and Director of Contract Compliance for a major governmental agency. She is admitted to practice law in Illinois. She received her Juris Doctorate degree from the University of Florida Levin College of Law and her Bachelor of Science degree with honors from Fisk University.
INTRODUCTION
Government agencies and Fortune 500 companies
nationwide have supplier diversity programs that
are intended to facilitate the establishment, growth,
and success of small businesses that are majorityowned, controlled and operated by one or more persons who are deemed to be disadvantaged, minority, woman, veteran, disabled, and/or a member of the LGBT community. Businesses that are owned by
these individuals are commonly referred to as disadvantaged business enterprises (DBEs), minority business enterprises (MBEs), women business enterprises (WBEs), veteran-owned business enterprises (VBEs), business enterprises owned by people with
disabilities (BEPD businesses) or LGBT-owned business enterprises (LGBT businesses). Small businesses obtain these designations after they apply for and
receive “certification” from a certifying entity or
certifier.
Supplier diversity programs help certified small
businesses become successful by offering them a
variety of benefits and opportunities to compete
for and secure contracts and subcontracts from
government agencies, their prime contractors and
consultants, and from many of the top corporations
nationwide. This article, the first in our Government
Contracts and Diversity series, will discuss: (i) the
benefits that are available to small businesses after
they obtain their certification eligibility; and (ii) how attorneys can help their small business clients navigate the certification process to achieve their business goals.
WHAT IS A “CERTIFIED” BUSINESS?
Many types of certification exist. A certified business is generally defined as a business that is deemed by
a certifying entity to be at least 51 percent or more
owned, controlled, and operated by one or more
individuals who are United States citizens that are
(i) women; (ii) Black, Asian Indian, Asian-Pacific,
Hispanic and/or Native American; (iii) veterans;
(iv) service-disabled veterans; (v) persons with disabilities; (vi) LGBT; or (vii) socially and economically disadvantaged. Whether a business is deemed to be
majority-controlled by these individuals depends
THE CERTIFICATION ELIGIBILITY OF SMALL BUSINESSES:
WHAT YOUR CLIENTS NEED TO KNOW
THE CERTIFICATION ELIGIBILITY OF SMALL BUSINESSES: WHAT YOUR CLIENTS NEED TO KNOW | 39 on its management and daily operations. Other certifications, such as small, local, HUBZone, and development enterprise zone business, are based on the size or location of the business. Most certifying
agencies have certification requirements that specify the eligibility criteria and application process for businesses that are seeking certification. DBE, MBE,
WBE and VBE certifications are the most common
types of certification.
Certifying agencies typically follow certain procedures when making certification decisions including: (i) performing an on-site visit to the office or jobsite of the applicant; (ii) interviewing the owners
and officers; (iii) reviewing their professional biographies; (iv) analyzing the ownership and control of the applicant; (v) evaluating the bonding and
financial capacity of the firm; (vi) assessing the work history of the applicant and its recent contracts;
(vii) assessing the equipment owned and leased by
the applicant; and (viii) reviewing the licenses issued to the applicant and its key personnel to perform
principal business activities.
Comprehensive certification requirements are generally considered to be more credible because they are more effective at preventing ineligible applicant
businesses from obtaining certification and contract opportunities that are specifically targeted or set aside for certified businesses. The certification application process is often extensive, document-intensive, time-consuming, and complex, as well as exhausting to most applicants. As a result,
many small businesses do not apply for certification
although they may be eligible.
If you have small business clients or seek to represent them, you need to know the benefits of certification and how you can help small businesses receive them. Simply put—certification is a nobrainer for eligible small businesses. It is the stamp of approval that allows them to participate in supplier diversity programs in the public and private sectors that promote certified small businesses.
Certification is one of the best marketing tools that
a small business can have to grow and sustain its
success. Besides securing major contract and subcontract opportunities, there are many other benefits to being certified.
WHAT ARE THE BENEFITS OF
CERTIFICATION ELIGIBILITY?
Although certification offers many benefits to small
businesses, many businesses do not seek certification eligibility because of the time and expense required to complete the application process. It can
take several months for applicants or their attorneys
to compile all of the required certification documents and to complete a certification application.
Some certifying agencies also require applicants
to submit an application fee with their application.
Many applicants seek free assistance from their
local assist agencies or from business and community organizations. More established small businesses tend to hire experienced attorneys in private law firms to evaluate their certification eligibility
and help them complete their certification application. These attorneys are more skilled at identifying potential certification issues and properly addressing them in the application with the appropriate written documentation.
If your small business clients need or want to receive
certain benefits to help sustain or grow their business, then applying for certification eligibility from the appropriate certifying agencies could be well
worth it. Here are some of the certification benefits
that you should discuss with clients:
• Access to relationships with supplier diversity
and procurement administrators, and federal,
state, and local agencies nationwide;
• Opportunities to pursue major contracts and
subcontracts with corporations, prime contractors, and government agencies that have supplier diversity or MBE/WBE policies and
programs;
• Access to business networking events and programs, mentor/protégé relationships, executive and business education, and capacity development programs;
40 | THE PRACTICAL LAWYER FEBRUARY 2022
• Eligibility for local, regional, and national
awards, and recognition by business organizations in their industry and community; • Promotion of their business, expansion of the
company’s visibility, and development of business relationships in the public and private marketplace; and • Support from other certified small business
owners and small business advocates who are
committed to promoting diversity, equity, and
the inclusion of small businesses.
There are four primary benefits to small businesses
that are certified. Those benefits are: (i) access to
contract administrators with major corporations and
governmental agencies; (ii) educational and professional development opportunities; (iii) visibility and recognition in their community and industry; and
(iv) strong advocacy and support. This article will
give some examples of each of these benefits so
that you know how they could help your clients.
Access to corporations and government agencies
Certification from an acceptable certifying entity
gives certified small businesses:
• Access to contract opportunities and business
resources from select major corporations and
government agencies that have supplier diversity programs to promote small businesses; • Access to many Fortune 500 corporations and
other businesses and government agencies that
have supplier diversity programs which offer
certain benefits, including contract opportunities and business resources; • Access to local and national databases of prospective bidders and contractors/consultants who may want to subcontract with your small
business clients;
• Access to information about formal and informal
contract and subcontract opportunities;
• Inclusion in databases of certified businesses
which are accessed by corporations and their
prime contractors/consultants that are seeking
to meet their small business participation goals;
• Access to supplier diversity and contract administrators who are responsible for developing relationships with diverse suppliers, assessing
their goods or services, and assisting them in
learning how to participate in the company’s
bidding and purchasing process to receive contract opportunities; • Access to corporate executives and buyers who
may provide information about contract and
subcontract opportunities in the pipeline, and
who may facilitate your client’s introduction to
select prime contractors/consultants; and
• Opportunities to attend business networking
events that are intended to facilitate contracting
relationships between certified businesses and
major corporations, as well as between certified
businesses and other small businesses who seek
teaming relationships.
Educational and professional development
Certification from an acceptable certifying entity
gives certified small businesses access to educational and professional development opportunities with select major corporations and government
agencies that have supplier diversity programs to
promote small businesses, including:
• Access to small business programs that offer
business resources including professional services, financial assistance, and networking opportunities;
• Access to technical and financial resources
at government agencies and small business
organizations;
• Capacity development support from prime
contractors;
• Opportunities to be mentored by large businesses and/or business executives who seek to participate in a formal mentor/protégé program;
• Access to business and professional development workshops;
THE CERTIFICATION ELIGIBILITY OF SMALL BUSINESSES: WHAT YOUR CLIENTS NEED TO KNOW | 41 • Opportunities to participate in executive or
leadership educational programs;
• Access to certain business resources from prime
contractors (i.e., bonding, lines of credit, insurance, equipment, supplies, materials, or services); and • Opportunities to participate in small business
forums, organizations, committees, surveys, and
other activities to become more knowledgeable
about challenges that prevent small business
owners from achieving their business goals.
Visibility and recognition
Many certified small businesses consider their certification eligibility to be a badge of honor that should be advertised to prospective clients and customers,
particularly those that may be required to do business with certified businesses by meeting small business contract participation requirements. Most
certifying agencies have a directory of certified firms that is publicly available to companies seeking to do
business with certified small businesses. Certification from an acceptable certifying entity increases the visibility and recognition of certified small businesses in their public and private marketplaces and helps them to market their goods and services.
There are many ways that certification eligibility can
be used by small businesses to promote their goods
or services including, but not limited to:
• Displaying their certification letters and/or certificates in their workplace; • Specifying their certification status on the company’s marketing materials; • Posting their certification eligibility on social
media;
• Promoting their business by specifying their certification status within their business networks, including their sponsorship activities, speaking engagements, business conferences, workshops, meetings, and other business development activities; • Increasing their visibility and recognition by
receiving and being nominated to receive local,
regional, or national awards by business organizations; and • Holding leadership positions in local, regional,
and national business, industry, procurement
and/or supplier diversity or small business
organizations.
Advocacy and support
Certification from an acceptable certifying entity
positions certified small businesses to benefit from
the strong and effective advocacy by small business
advocates, small business organizations and groups,
as well as government officials and local, regional,
and national administrators who are committed
to the development, growth, and success of small
businesses. Certification benefits in this area may
include:
• Connecting with small business owners and
advocates throughout the country, virtually and
in-person, through national, regional, and local
business meetings;
• Opportunities to become a small business advocate to support and promote small businesses, reduce their contracting barriers, and increase
their contracting and subcontracting opportunities; and • Opportunities to make presentations to and
write articles for business organizations that
promote and support small businesses.
WHAT IS THE ATTORNEY’S ROLE IN
THE CERTIFICATION PROCESS?
Many small businesses do not know how to successfully compete for contract opportunities with Fortune 500 companies, other large businesses, and
government agencies. Certification has proven to
be one of the best tools they have to get their foot
in the door of major corporations and government
agencies that have MBE/WBE or supplier diversity
programs. One of the best ways that attorneys can
help their small business clients achieve their business goals in the public and private marketplaces is by encouraging those that qualify to obtain certification eligibility from the right certifying entity, and
42 | THE PRACTICAL LAWYER FEBRUARY 2022
helping them to successfully navigate the certification process. But it is not as simple as it may seem.
Although most attorneys with small business clients do not regularly practice in this specialized area of law, many nonetheless believe they can easily help their clients apply for and obtain certification eligibility. I find this to be particularly true with corporate law attorneys. Depending on the circumstances, inexperienced or uninformed attorneys can prolong and complicate the certification application
process for their clients, resulting in a denial of their certification eligibility and their subsequent refusal
to pay related legal fees. There are several ways an
attorney can help their small business clients seeking certification eligibility to achieve their business goals and avoid unintended consequences that may
negatively impact their business.
Better understand the certification eligibility
requirements and common pitfalls
There are many governmental and nonprofit certifying agencies nationwide. Most of them have a number of certification requirements that must be
met in order to certify a small business applicant.
There are common pitfalls that may negatively
impact applicants’ certification eligibility, including:
(i) the submittal of incomplete or inaccurate certification applications; (ii) failure to submit each of the required documents on the certification checklist; (iii) failure to provide an explanation for documents that do not apply to the applicant; (iv) failure to submit current documents; and (v) failure to submit copies of legible, complete and/or executed
documents.
Determine whether their business
qualifies for certification eligibility
Before you complete and submit a certification
application for your client or approve their application for submittal, you should conduct a certification eligibility analysis to determine whether there are any eligibility issues that should be addressed
before the application is filed. You should: (i) review the applicable certification requirements of the
entity from which your client is seeking certification; (ii) review a draft application and all of the required supporting documents to identify certification eligibility issues; (iii) propose a legal strategy to address each eligibility issue; and (iv) develop an action plan with the client to execute the legal strategy to facilitate its certification.
Prepare the applicable certification
application and supporting documentation
Your client should provide you all of the documents
on the applicable certification checklist to review.
You should make sure that each certification document is complete, accurate, current, and legible. You may also need to draft missing documents and/or
recommend the submittal of other business documents to meet the submittal requirements. The completion of a certification application with all of
the supporting documents can take several months
because attorneys typically receive incomplete,
inaccurate, outdated and illegible documents from
clients which must be replaced or modified.
Properly respond to certification inquiries
and denial decisions by a certifying entity
After a certification application is submitted, it is
initially reviewed by the certifying entity for completeness. If the application is incomplete or if the certifier has questions about any of the certification documents, he or she will request additional information or documents from the applicant. You
should advise your client to inform you of all inquiries for additional information. You should review and approve all responses by your client to the
certifier prior to their submittal to ensure that the
responses do not compromise certification eligibility. If your client is denied certification eligibility, you should consider referring them to a law firm or
attorney who has significant experience in successfully responding to certification denial decisions.
Most certification denial decisions are upheld on
appeal by the certifier.
THE CERTIFICATION ELIGIBILITY OF SMALL BUSINESSES: WHAT YOUR CLIENTS NEED TO KNOW | 43 Facilitate the expansion of client’s
certification specialty areas
When your client is certified, it will receive a certification letter or certificate from the certifier that includes the certification specialty areas of your client (i.e., approved principal business activities). Your client can only fulfill contract participation goals
in those designated certification specialty areas. If
your client would like to fulfill contract participation goals in other specialty areas, it may need to apply
for a certification expansion of their specialty areas
before it is approved.
Provide related legal services or refer clients to
experienced attorneys if they need legal services
After your client obtains certification eligibility, it can seek opportunities to participate on contracts
that have contract participation goals or requirements for certified businesses. For example, a government bid solicitation may require bidders to submit a plan to subcontract or form a joint-venture
with certified businesses for a specified percentage
of the total bid amount. As they identify prospective
bidding and contracting opportunities, your clients
may require guidance and consultation on related
legal matters, including:
• Government bidding and contracting;
• Contract and subcontract review, negotiations,
and drafting;
• Small business subcontracting plans and utilization reports; • Section 3 and other types of certification
eligibility;
• Joint venture, mentor/protégé, and other types
of teaming relationships and agreements;
• Contract monitoring and compliance;
• Contract disputes;
• Contract terminations;
• Certification ineligibility or denial decisions;
• Governmental investigations; or
• Debarments or suspensions from government
contracting.
Help small businesses understand and comply
with government rules, regulations, and policies
It is critical that your small business clients that seek government contracts know how to navigate the
government procurement, solicitation, and contracting process in order to achieve their business goals and avoid severe contract penalties. Penalties
may include, but are not limited to, contract termination, debarment, suspension, certification denial, decertification, liquidated damages, fines, as well as
civil and criminal penalties.
SUMMARY
Certification is a no-brainer for eligible small businesses if they want to take advantage of the available benefits in the public and private marketplaces to help them grow, expand, and achieve their business goals. It is the stamp of approval that allows them to participate in supplier diversity programs
of Fortune 500 companies, other large businesses,
and governmental agencies. Certification is one of
the best tools that a small business can obtain to
achieve and sustain their success. Besides securing
major contract opportunities, there are many other
benefits to being certified.
The most common benefits include: (i) access to
significant contract and subcontract opportunities
and business resources from corporations and government agencies; (ii) educational and professional development support; (iii) increased visibility and
recognition in the public and private marketplaces;
and (iv) support from small business advocates.
Your small business clients should consider these
potential benefits in order to determine whether
they should apply for and obtain certification eligibility from one or more certifying agencies or whether they should expand their current certification eligibility to include additional specialty areas that may qualify them to compete for more contract
opportunities.
44 | THE PRACTICAL LAWYER FEBRUARY 2022
Each certifying entity has their own certification
eligibility requirements and certification application process. If your client is certified by one agency, it doesn’t mean that it will be certified by another
agency. Unfortunately, if your client is denied certification by one certifying entity, it increases the likelihood of a denial by another certifier. Before you provide small businesses with legal consultation in
this specialized area of the law, make sure that you
have fully reviewed and understand the applicable
certification requirements. When in doubt, consider
referring your client to a small business organization
or government agency that provides certification
assistance or, alternatively, to an experienced government contracts attorney in private practice.
During these economically challenging times, certification eligibility can help your small business clients to significantly increase their revenues, grow their
business, and achieve their business goals. Helping
your clients understand the certification process will
also help you grow and expand your client base, and
give you opportunities to provide additional legal
services in related areas of the law.
EXHIBIT 9
EXHIBIT 10
Quintairos, Prieto, Wood & Boyer, P.A. | 115 S. LaSalle Street, Suite 3100 | Chicago, Illinois 60606 Office: 312-566-0040 | Cell: 312-504-8338 | Fax: 312-566-0041 | Email: [email protected] Anita J. Ponder
Partner & Director of Government Contracts
Anita J. Ponder is a partner and the Director of Government Contracts at Quintairos, Prieto, Wood & Boyer, P.A. (QPWB) – the largest minority and women-owned law firm in the nation. After more than 30 years of providing consultation, strategic guidance, training and advocacy to government agencies and government contractors including minority, women-owned and veteran businesses, Ms. Ponder brings to the firm extensive legal and consulting experience in government procurement and contracting, bidding, MBE/WBE contract compliance, and diversity, equity and inclusion (DEI)/Social Equity. It is a truth universally acknowledged that no matter where she shows up, Anita Ponder is always prepared and determined to achieve her client’s goals – which may explain her phenomenal legal career.
Ms. Ponder represents State and local government agencies and nonprofit business organizations. She also represents industry leaders including major corporations, large businesses, mid-sized and small businesses, including disadvantaged, minority, women and veteran-owned businesses. Some of Ms.
Ponder’s most notable legal and professional accomplishments include:
Developing and implementing a small business certification initiative that provides legal and business consulting services to DBE/MBE/WBE/VBE certification applicants who are seeking to fulfill DBE/MBE/WBE/VBE contract participation goals on government contracts
Providing contract and other legal services via a State agency’s technical assistance program which provides outreach, training and technical assistance to small, minority, women-owned and veteran businesses
Preparing a comprehensive DEI/Social Equity framework, administrative rules, objective DEI/Social Equity elements, rubric and RFP template instructions to implement existing DEI/Social Equity legislation for a State agency
Reviewing and modifying governmental solicitations and contracts of governmental agencies and related bid proposals
Drafting a comprehensive Code of Conduct for a major governmental agency and one of the nation’s largest airport systems
Providing legal and consulting services to Section 3 and Resident Owned businesses via a City administered technical assistance program
Preparing a comprehensive 50 State memorandum on key government procurement, bidding and lobbyist requirements
Quintairos, Prieto, Wood & Boyer, P.A. | 115 S. LaSalle Street, Suite 3100 | Chicago, Illinois 60606 Office: 312-566-0040 | Cell: 312-504-8338 | Fax: 312-566-0041 | Email: [email protected] Prior to joining QPWB in 2018, Ms. Ponder was a partner in the international, full-service law firm of Seyfarth Shaw LLP in the Government Contracts and Construction Law Practice Groups. Seyfarth Shaw, one of the top law firms in Chicago and nationwide, has over 800 lawyers in 14 offices. Some of her major accomplishments at Seyfarth include: conducting a nationwide research project to examine government purchasing policies and procedures, and related case law, in connection with state and local minority and women business enterprise (MBE/WBE) programs; preparing a comprehensive report recommending best DBE/MBE/WBE and innovative practices, policies and procedures; providing consultation to public housing authorities (PHAs) in connection with their efforts to promote economic development, neighborhood economic improvement and individual self-sufficiency by low-income, minority residents; defending government contractors in governmental investigations and debarment proceedings related to allegations of misconduct on government contracts; and conducting DBE/MBE/WBE government project audits and providing related contract compliance training to government agencies and construction contractors, including DBE/MBE/WBEs.
The Chicago business and governmental communities recognizes Ms. Ponder’s exceptional efforts to help small businesses to develop and implement their business plan to achieve their goals in the governmental marketplace while staying in compliance with complex rules, regulations and requirements when she was the Chair of the Government Contractors Business Forum (GCBF) for approximately 10 years. The GCBF was an award-winning, innovative initiative that Ms. Ponder organized at her prior law firm to provide key information, counseling and support to government contractors and consultants, including minority, women-owned and veteran businesses in various industries, including aviation, information technology, transportation, architecture and engineering, construction, program management and financial services.
Over 1000 business owners, executives, professionals and government representatives participated in and/or supported the GCBF under the dynamic leadership of Ms. Ponder.
Before she worked at Seyfarth Shaw, Ms. Ponder was a partner at the law firm of Drinker Biddle & Reath (DBR), formerly Gardner Carton & Douglas, and practiced in the Government Regulation, Lobbying and Advocacy Department. DBR is a national, full-service law firm with more than 600 lawyers in 12 offices nationwide. Prior to DBR, she worked at the law firm of Quarles & Brady, another national law firm with approximately 500 attorneys in 11 offices. Some of her major accomplishments at DBR and Quarles & Brady include: providing government relations services to government contractors in various industries in connection with State regulatory hearings; conducting nationwide research to examine government purchasing policies and procedures in connection with MBE/WBE programs; representing construction contractors in government debarment proceedings in connection with issues related to DBE/MBE/WBE compliance; and providing government relations and government contract services to government contractors in connection with major spending programs of the City of Chicago, State of Illinois, Cook County and federal government.
Ms. Ponder has been one of the nation’s most effective advocates of small businesses and supplier diversity in the public and private sectors. Throughout her distinguished professional career, she has been a strong proponent for the development, promotion and inclusion of DBE/MBE/WBEs on federal, State and local contracts. She started her career after law school with the City of Chicago in the administration of Mayor Harold Washington in the Departments of Public Works as a Contract Compliance Specialist and subsequently, in the Procurement Services Department as the Coordinator of Contract Compliance and Director of Contract Compliance, where she was responsible for the development and implementation of the City’s DBE/MBE/WBE and EEO programs. Some of her responsibilities for the City of Chicago included:
developing, implementing and monitoring administrative rules and regulations applicable to over 3,000 contracts annually totaling over $700M; drafting and negotiating major contract terms and conditions; resolving contract disputes between the City, its prime contractors and their subcontractors; developing and implementing regulations governing DBE/MBE/WBE certification; conducting contract compliance policy sessions, procurement seminars and certification eligibility meetings; developing a comprehensive
Quintairos, Prieto, Wood & Boyer, P.A. | 115 S. LaSalle Street, Suite 3100 | Chicago, Illinois 60606 Office: 312-566-0040 | Cell: 312-504-8338 | Fax: 312-566-0041 | Email: [email protected] Contract Compliance Training Program for City managers and employees; and coordinating and implementing the first annual City sponsored Construction Management Training Program for government contractors.
Ms. Ponder has delivered a number of speeches on government contracting and small businesses to major corporations, business organizations, bar associations and government agencies throughout the country, and she has prepared several articles which have been published in legal and business publications. She has appeared on television and radio programs to discuss government contract and small business issues.
Her legal, business and community affiliations have been numerous. She has received notable accolades throughout her career for her significant contributions to the legal and small business communities. To name a few - her honors include the Crescent Moon Award in Legal Excellence by Phi Beta Sigma Fraternity; Business Leader of Color by Chicago United; the U.S. Small Business Administration’s “Woman in Business Advocate of the Year” Award; the CUCA “Woman of the Year” Award; and the Sage Award for Excellence and Leadership from the Chicago Commission on Human Relations Advisory Council on Women. Ms. Ponder has been recognized as one of the most influential women in Chicago by Crain’s Chicago Business and the Chicago Business Journal; one of the most influential Chicagoans by N’DIGO Magazine; and one of the women making a difference by Today’s Chicago Woman Magazine.
Ms. Ponder received her J.D. from the University of Florida Holland Law Center in Gainesville, Florida and her B.A. with honors in public administration and political science from Fisk University in Nashville, Tennessee. She is admitted to the bars of the State of Illinois and the United States District Court for the Northern District of Illinois.
Summary of Government Contract and DEI/Social Equity Experience Best Practices (Government Contracting, Procurement and DEI/Social Equity) Bidding & Estimating
Bonding & Insurance
Business Development
Business Reorganization
Certified Payrolls
Change Orders & Modifications
Construction Law
Contract Monitoring, Compliance & Reporting
Employment Laws
Financial Matters
Government Contracts (Federal, State and local)
Government Procurement (Federal, State and local)
Government Subcontracts (Federal, State and local)
Governmental Investigations
Legal Research, Analyses and Writing
Legal Structures
Lien Preparation
Marketing & Sales
MBE/WBE Certification Eligibility
PLA/Bargaining Agreements
Prequalification Assistance
Prevailing Wages
Project Management
Prompt Payment Requirements
Quintairos, Prieto, Wood & Boyer, P.A. | 115 S. LaSalle Street, Suite 3100 | Chicago, Illinois 60606 Office: 312-566-0040 | Cell: 312-504-8338 | Fax: 312-566-0041 | Email: [email protected] Small Business and MBE/WBE Utilization Plans
Suspension and Debarment
Teaming Agreements
Training
Contact
Chicago Office
115 South LaSalle Street, Suite 3100
Chicago, Illinois 60603
Telephone: (312) 566-0040
Facsimile: (312) 566-0041
E-mail: [email protected]
Quintairos, Prieto, Wood & Boyer, P.A. | 115 S. LaSalle Street, Suite 3100 | Chicago, Illinois 60606 Office: 312-566-0040 | Fax: 312-566-0041 | Email: [email protected] Dragomir A. Tsvetenov
Associate
Dragomir A. Tsvetenov is an associate in the Chicago office of Quintairos, Prieto, Wood & Boyer, P.A. He focuses his practice in the areas of government contract and procurement law, administrative law, government affairs, public finance and commercial transactions.
Mr. Tsvetnov’s experience includes (i) consultation to bidders/ contractors, government agencies and major corporations regarding government procurement regulations, laws and policies; (ii) preparation of responses to Requests for Information (RFIs) and Requests for Proposals (RFPs); (iii) preparation of subcontracting plans which specify the commitment of government bidders to subcontract with businesses in designated contract groups including small business owners, women (WBEs), minorities (MBEs), veterans, persons with disabilities; (iv) interpretation, negotiation and drafting of government contracts, contract modifications, and subcontract agreements; (v) representation of disadvantaged, women and minority business enterprises (D/W/MBEs) to obtain certification eligibility in connection with D/W/MBE contract participation requirements and the preparation of D/W/MBE certification applications, (vi) representation of government agencies and businesses in connection with their communication strategies and legislation involving government agreements and contracts, procurement policies and procedures, bond financing and tax increment financing; (vii) consultation with bidders/proposers in connection with the formation of strategic contracting alliances, identification of prospective bidding opportunities and business development resources; and (viii) Technology Data Licensing Agreements for a Multinational Finance Corporation.
Some of Mr. Tsvetenov’s most notable legal and professional accomplishments include:
Developing and implementing a small business certification initiative that provides legal and business consulting services to DBE/MBE/WBE/VBE certification applicants who are seeking to fulfill DBE/MBE/WBE/VBE contract participation goals on government contracts
Providing contract and other legal services via a State agency’s technical assistance program which provides outreach, training and technical assistance to small, minority, women-owned and veteran businesses in the construction industry Preparing a comprehensive DEI framework, administrative rules, objective DEI elements, rubric and RFP template instructions to implement existing DEI legislation for a State agency
Quintairos, Prieto, Wood & Boyer, P.A. | 115 S. LaSalle Street, Suite 3100 | Chicago, Illinois 60606 Office: 312-566-0040 | Fax: 312-566-0041 | Email: [email protected] Reviewing and modifying governmental solicitations and contracts of governmental agencies and related bid proposals
Drafting a comprehensive Code of Conduct for a major governmental agency and one of the
nation’s largest airport systems
Providing legal and consulting services to Section 3 and Resident Owned businesses via a City administered technical assistance program
Mr. Tsvetenov received his Juris Doctor from the University of Florida, Levin College of Law in May 2017 and Bachelor of Science cum laude from Jacksonville University in May 2014 having studied Political Science.
Mr. Tsvetenov is a veteran, having served in the United States Navy from May 2007 to July 2012. Among his duty stations, Mr. Tsvetenov served on the U.S.S. George Washington (CVN-73) in Yokosuka, Japan; and at the U.S. Naval Hospital at Guantanamo Bay, Cuba to support Operation Enduring Freedom and Caribbean Operations aboard an overseas naval station.
Mr. Tsvetenov is licensed to practice law in Illinois.
Summary of Government Contract and DEI/Social Equity Experience Best Practices (Government Contracting, Procurement and DEI) Bidding & Estimating
Bonding & Insurance
Business Development
Business Reorganization
Certified Payrolls
Change Orders & Modifications
Construction Law
Contract Monitoring, Compliance & Reporting
Employment Laws
Financial Matters
Government Contracts (Federal, State and local)
Government Procurement (Federal, State and local)
Government Subcontracts (Federal, State and local)
Governmental Investigations
Legal Research, Analyses and Writing
Legal Structures
Lien Preparation
Marketing & Sales
MBE/WBE Certification Eligibility
PLA/Bargaining Agreements
Prequalification Assistance
Prevailing Wages
Project Management
Prompt Payment Requirements
Small Business and MBE/WBE Utilization Plans
Suspension and Debarment
Teaming Agreements
Training
Quintairos, Prieto, Wood & Boyer, P.A. | 115 S. LaSalle Street, Suite 3100 | Chicago, Illinois 60606 Office: 312-566-0040 | Fax: 312-566-0041 | Email: [email protected] Contact
Chicago Office
115 South LaSalle Street, Suite 3100
Chicago, Illinois 60603
Telephone: (312) 566-0040
Facsimile: (312) 566-0041
E-mail: [email protected]
2018 Marijuana in
the Law: The Grass
is Greener . . . But
for Whom?
Presented By: Carol A. Cesaretti
Authored By: Dragomir Tsvetenov
Road Map
Status Quo
Legal Status
Workers’ Compensation Issues
Conclusion
MARIJUANA STATUS QUO
Usage in the U.S.
MARIJUANA LEGALITY
Legal Status Quo
• The Federal Government deems marijuana to be a Schedule I narcotic controlled substance, meaning that it has no acceptable medical use. • Marijuana is now legal, in some form or another, in twenty nine States in the U.S. and D.C., with more states considering legalization measures every year.
• This creates an inherent contradiction between federal and state laws.
Marijuana Legality
Dark Green – Recreational Use
Green – Medical Use
Light Green – Limited THC Medical Use
Grey – Illegal
D – Decriminalized
Federal Law
• While marijuana remains illegal under federal law, the U.S. government seems to have little interest in challenging the state laws or prosecuting individuals who use marijuana in
compliance with state laws, regardless of the purpose of its use. • Although no action has been taken, Attorney General Sessions has signaled a willingness to reverse previous federal stance toward state marijuana legalization and return to prosecution.
EMPLOYER/ WORKERS’
COMPENSATION ISSUES
Employee Marijuana Use
Scenario 1: An employee sustains a traumatic injury at a jobsite.
To treat pain, the physician prescribes medical marijuana instead of an opioid.
Scenario 2: An employee sustains an injury at a jobsite and is asked to take a drug test after the fact. The test comes back positive for marijuana.
Question: Is the employer required to pay for medical marijuana? Is the employer required to pay benefits when they can show the employee was using marijuana at the time of the accident? And if the employer has a drug-free workplace policy in force, do they have the right to fire the employee for using marijuana either recreationally or for medical purposes?
Additional Problems
• Lack of study
• Potential for overdose
• No data on delivery method or dosage
• ODG guidelines will not approve
Opioid Crisis
- Drug overdose is the leading accidental cause of death in the United States
- 20,101 overdose deaths from painkillers in 2015
- 12,990 overdose deaths from heroin in 2015
Employer Obligations
Employer Accommodations?
- Under Federal Law for the
Americans With Disability
Act?
- Under State disability laws?
- Under the State’s marijuana
laws?
- Under state workers’
compensation laws?
Barbuto
• “The fact that the employee's possession of
medical marijuana is in violation of Federal
law does not make it per se unreasonable as
an accommodation. The only person at risk
of Federal criminal prosecution for her
possession of medical marijuana is the
employee. An employer would not be in joint
possession of medical marijuana or aid and
abet its possession simply by permitting an
employee to continue his or her off-site
use.”
Barbuto v. Advantage Sales & Mktg., LLC, 477 Mass. 456, 78 N.E.3d 37 (2017)
Accommodations
•The issue of whether an employer needs to provide an
accommodation may be difficult under state law – just because employers are not required by federal law to provide a medicinal marijuana usage accommodation, does not mean that the
employee is not entitled to an accommodation under state law.
Workplace Policy
• Non-Medical marijuana use is more of a safe
harbor for an employer. If an employer maintains
a zero-tolerance policy for drug use and an
employee tests positive for marijuana without a
medical marijuana recommendation, the
employer is free to discipline that employee per
their policy, so long as they enforce that policy
consistently.
Flynn v. Raytheon Co.
Employers who enforce drug-free work
policies still need to take care to
enforce those policies consistently. In
a Massachusetts case, an employee’s
suit for disability discrimination was
able to survive a motion to dismiss
when that employee was able to show
that his former employer’s anti-alcohol
policy was enforced more rigorously
against him that other employees.
Flynn v. Raytheon Co., 868 F. Supp.
383 (D. Mass. 1994).
Signs of intoxication
- Relaxation
- Alteration of Perceptions
- Distortions of Time and Space
- Red Eyes
- Impaired Motor Skills
- Decreased Short Term Memory
- Dry Mouth
- Tachycardia
- Increased appetite
- Lowered blood pressure
Accommodations
• Employers that must or choose to accommodate
medical marijuana users should be aware that they
must comply with all federal regulations, such as those already mentioned, but also that they are required to
provide a safe working environment for all of their
workers. If an accommodation would interfere with a
safe working environment, it should not be provided.
Intoxication as a Defense
Limitations
• The majority of states are drawing a line when it
comes to intoxication. It is not the blanket get out
of claim free card that some employers
misunderstand it to be. There’s a distinct
difference between things that the employee
CAUSES and things that HAPPEN TO an
employee.
Employers to Pay
• Initially, most people assumed that courts could not and would not require employers and their workers'
compensation carriers to pay for medical marijuana while it remains a Schedule I drug under federal law. After all, a state court cannot require an employer to violate
federal statutes.
• However, in 2014, an appeals court in New Mexico ruled that if medical marijuana was recommended by the
physician, it must covered by workers' compensation.
Vialpando v. Ben's Auto. Services, 2014-NMCA-084,
331 P.3d 975.
VIALPANDO
“Although not dispositive, we note that the [DOJ]
has recently offered what we view as equivocal
statements about state laws allowing marijuana
use for medical and even recreational purposes.
On one hand, the [DOJ] affirmed that marijuana
remains illegal under the CSA and that the [DOJ]
will continue to …enforce the statute. But, on the
other hand, and in the same documents, the
[DOJ] identified eight areas of enforcement
priority and indicated that outside of those
priorities it would generally defer to state and
local authorities.”
Vialpando v. Ben's Auto. Services, 2014-NMCA-084, 331 P.3d 975
CONCLUSION
Review
• Marijuana Status Quo?
• Legal Status.
• Employer Issues/ Workers’ Compensation.
Questions?
EXHIBIT ϭϭ
___________________________
M E M O R A N D U M
TO: Gina Oka, General Counsel
City of Chicago, Department of Procurement Services
FROM: Anita Ponder, Partner
Dragomir Tsvetenov, Associate Attorney
Quintairos, Prieto, Wood & Boyer, P.A.
DATE: November 30, 2018
RE: City of Chicago - Trucking Industry Research
I. INTRODUCTION
The City of Chicago Department of Procurement Services (“the City”) seeks additional information regarding how trucking companies operate in Illinois to: 1) re-evaluate its process or requirements governing the DBE/MBE/WBE certification eligibility and/or compliance of trucking companies; and 2) determine whether it should modify its DBE/MBE/WBE certification eligibility and/or compliance requirements or policies which govern trucking companies that participate on City contracts.
The cornerstone for many supplier diversity programs, including the City’s programs to promote the participation of disadvantaged, minority, women-owned businesses, veteran-owned business enterprises and business enterprises owned or operated by people with disabilities, is having a base of qualified and capable firms that are eligible to fulfill contract participation goals for these businesses. It is the policy of the City that these businesses have the maximum feasible opportunity to participate fully in all contracts financed in whole or in part with City funds, or funds over which the City has control and/or that these businesses are provided prime contracting and subcontracting opportunities.
Certification is the application process by which the City and other certifying agencies determine whether a business meets designated qualifications to be deemed a disadvantaged business enterprise (“DBE”), minority business enterprise (“MBE”), women-owned business enterprise (“WBE”), veteran-owned business enterprise (“VBE”) and/or business enterprise owned or operated by people with disabilities (“BEPD”) or possibly another type of enterprise that may be eligible to fulfill a contract participation goal on a government contract.
Recognizing that the City primarily certifies companies as DBEs, MBEs, WBEs, VBEs and/or BEPDs, we generally refer to these certified firms throughout this memorandum collectively as DBE/MBE/WBEs for discussion purposes.
The City asked the law firm of Quintairos, Prieto, Wood & Boyer, P.A. to answer specific questions regarding how trucking companies operate. After conducting extensive research, this memorandum summarizes our research on each of the issues presented by the City.
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In addition, this memorandum further addresses the issue regarding single-owner truck operators that use their personal residence as their principal business office and store their truck at another location. We understand that due to zoning restrictions related to home-based businesses, such single-owner operators that list their home as their principal business office are not eligible to receive a General Business License from the City which is required for DBE/MBE/WBE certification eligibility. Below are the questions and issues that the City has asked us to address:
• What is a “Trucking Company”?
• What is meant by “Brokering”?
• What is meant by “Leasing” trucks?
• What is the difference between a Broker and a Lease?
• When is it required for a trucking company to report on certified payrolls? • What it means by “Owner Operator”?
• What is the reporting requirement for an Owner Operator as it relates to reporting wages and reporting on a certified payroll document?
• If a certified trucking company purchases materials from a quarry and hauls it to the job site, why is DBE/MBE/WBE credit not granted? It is the City’s understanding that although this is the industry standard, municipalities do not allow for DBE/MBE/WBE contract participation credit to be counted. Why?
• If an independent Owner Operator stores their truck in a non-residential location, in compliance with zoning regulations, would this suffice for purposes of obtaining the necessary license? If so, what would be required as documentation? Our legal research began with researching and evaluating laws, ordinances, regulations and guidance governing the local and national trucking industry. We focused on relevant parts of the U.S. Department of Transportation (“US DOT”) DBE regulations which we cite, where applicable. Our research was further informed by relevant case law, and publically available data relating to the trucking industry, including various trucking association publications, as well as privately authored publications relating to the trucking industry including law review articles.
We discussed relevant information from these publications with key persons within the transportation industry, namely: Krista Matsui, Account Executive, Echo Global Logistics; Traci Baker, Civil Rights Specialist, Federal Highway Administration; and Jim Bramlett, CEO, 5 Strings Logistics. Echo Global Logistics is a leading provider of technology-enabled transportation and supply chain management services. The Federal Highway Administration (“FHWA”) is a division of the US DOT that specializes in highway transportation and serves the two main roles of: overseeing federal funds used for constructing and maintaining the National Highway System; and providing highway design and construction services for various federal land-management agencies. 5 Strings Logistics is a transportation and logistics company operating throughout the Midwestern United States with approximately 40 years of experience.
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1 The Bureau of Transportation Statistics,
htpps://www.bts.gov/sites/bts.dot.gov/files/docs/FFF_2017_Full_June2018revision.pdf. 2 The U.S. Small Business Administration, https://www.sba.gov/blogs/starting-trucking-business-0. 3 Roberson v. Indus. Comm'n (P.I. & I. Motor Exp., Inc.), 225 Ill. 2d 159, 866 N.E.2d 191 (2007).
II. QUESTIONS PRESENTED
A. What is a trucking company?
A trucking company is generally defined as a business that operates by moving materials from one location to another by means of truck hauling.1 Trucking companies may move
commercial goods, such as goods to be sold in retail stores, household goods which are shipped when a person or family moves from one home to another, livestock and farm equipment, construction materials to be used on a construction job site, debris, or any other material that needs to be moved from one location to another. Id. The overwhelming majority of materials moved by trucking companies are commercial goods and that is most often across state lines. Id.
In the United States, material moved via trucking companies account for more than materials moved by every other means combined, including rail, ship and air. Id.
According to the U.S. Small Business Administration (SBA), trucking companies operate by bidding on and fulfilling transportation accounts and contracts.2 Most trucking companies
usually operate in one of two forms, either as subcontracted drivers or privately-owned drivers.
Each of these forms is discussed below. The difference between the two forms is how they acquire drivers to fulfill their accounts and contracts.
Regarding “subcontracted drivers”, a trucking company operates using subcontractors as drivers. The owner of the trucking company operates the business and receives the contracts, and the drivers that perform the work are not actually employees of the trucking company, but are instead, independent contractors. This option cuts down on start-up costs, insurance costs, and required equipment, however, this option gives the owner less control over their drivers and cuts into their profits.
For example, the case of Roberson v. The Illinois Industrial Commission illustrates the operation of subcontracted drivers.3 In this workers’ compensation case, the court’s opinion discusses the ways in which the Plaintiff, Roberson, operated as a subcontracted driver.
Roberson quit his employment with the trucking company he was affiliated with (P.I. & I.) when he bought his own truck, and subsequently continued working for P.I. & I. as an independent contractor, instead of an employee. Id. Roberson signed an independent contractor contract in which he was to receive 78% of the gross revenue received by P.I. & I. for each load in exchange for Roberson’s services and equipment (truck). Id. “Roberson was responsible for all costs and expenses associated with operating his truck, including fuel, tolls, license plates, and taxes. The contract permitted Roberson to have employees, and he was required to have worker's compensation insurance coverage for himself and any employees. The contract contained an
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4 Federal Motor Carrier Safety Administration, htpps://www.fmca.dot.gov/registration/do-i-need-usdotnumber. 5 The Illinois Vehicle Code 625 ILCS 5/18c-1101 et seq., and its Administrative Rules, 92 ILL. Adm.
Code Chapter III.
6 US DOT DBE regulations 49 C.F.R. § 26.55. See also: Federal Highway Administration, https://fhwa.dot.gov/federal-aidessentials/commusefunction.pdf.
option to obtain such coverage through P.I. & I. Roberson also was required to have liability insurance coverage. The contract provided that Roberson must maintain and operate the equipment in compliance with all applicable laws and regulations, notify P.I. & I. of any accidents, and cooperate with P.I. & I. in investigating any accidents.” Id. The court’s opinion in this case illustrates a subcontractual trucking relationship between a driver and the company with which he is affiliated.
The second form of a trucking company is privately-owned drivers. In this type of operation, the trucking company owner controls all operations of the business, including hiring drivers as employees. The owner uses their own equipment (including trucks), pay higher insurance prices, and they may hire a fleet of private drivers. This option gives the trucking company owner total control over their business and its employees and promises the most return on profits. The downside is that this type of operation requires a greater amount of start-up capital and operating costs.
In most states, the definition of a trucking company is rather simple because those states have adopted the federal DOT regulation of requiring all trucking companies to acquire a USDOT number.4 A USDOT number is used to collect and monitor a company’s safety information, inspections, and crash investigations. Id. Illinois does not require all trucking companies to acquire a USDOT number. Illinois is in the minority of state legislatures that have not mandated compliance with the federal DOT regulation. Illinois trucking companies are only required to acquire a USDOT number if they transport goods across state lines. Id.
The State of Illinois requires a Public Carrier Certificate.5 Any person or entity engaged in the for-hire transportation of property, other than household goods, over public roads in intrastate commerce in Illinois must obtain from the Illinois Commerce Commission a Public Carrier Certificate. Id.
In terms of DBE certification, a DBE is required to own and operate at least one fully licensed, insured, and operational truck used on the contract to be certified in the DBE program as a trucking firm.6 To perform a commercially useful function, a DBE must also be responsible for the management and supervision of the entire trucking operation or a specified portion of the trucking operation to which it has been committed. Id. There cannot be a contrived arrangement for the purpose of meeting a DBE goal. Id.
A DBE can supplement its fleet by leasing a truck(s) from an established equipment leasing business open to the general public, however. Id. The lease must indicate that the DBE has exclusive use of and control over the truck. Id. This requirement does not preclude the leased truck from working for others during the term of the lease with the consent of the DBE,
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7 Northwestern University Journal of International Law and Business, Jeffrey S. Kinsler, Motor Freight Brokers: A Tale of Federal Regulatory Pandemonium, 14 Nw. J. Int’l L. & Bus. 289 (1994).
so long as the lease gives the DBE absolute priority for use of the leased truck. Id. Otherwise, the DBE does not receive full credit for DBE participation. Leased trucks must display the name and identification number of the DBE. Id. The DBE trucker must also hold the necessary, where appropriate, license, hauling permit, etc., as required by the State to transport material on public highways. Id.
The City may count the value of DBE trucking services toward a DBE contract participation goal under the following circumstances: 1) DBEs may lease trucks from another DBE, including an Owner Operator that is certified as a DBE. The DBE can count the entire value of services performed by these DBE trucks; and 2) DBEs may also lease trucks from nonDBEs and Owner Operators. The DBE can count the value of these trucking services up to the value of services performed by the DBE trucks used on the contract. Id. DBE participation can be counted for the value of services of non-DBE trucks that exceed the value of the services performed by DBE trucks only in the amount of the fee or commission a DBE receives as a result of the lease arrangement. Id.
A valid lease is required when the DBE leases equipment. Id. The lease must include such items as the lessor’s name, list of trucks to be leased by vehicle identification number (VIN), and the agreed upon amount of the cost and method of payment. Id. It is the responsibility of the DBE to provide the operator’s fuel, maintenance and insurance for all leased trucks. Id.
B. What is meant by “Brokering?”
Brokering in the trucking industry refers to the negotiations to haul material in which a freight broker assists shippers with freight ready to haul by locating carriers that are qualified to haul the load.7 Brokers are generally responsible for brokering deals with shippers and then facilitating the movement of a shipper’s freight. Id.
Brokers can run their own brokerage business or work for a broker company. Id. They are responsible for both arranging the transportation and tracking of a load hauled by a trucking company. Id. A freight broker is able to earn money by moving freight for less than its customer is willing to pay to ship the freight. Id. This difference creates a profit for the broker. Id. An entity seeking to ship goods, but that is not regularly engaged in shipping may want to employ a broker who can often help minimize the cost. Id.
For example, if a lumber company has a truck load of lumber that it needs moved to a buyer’s warehouse, it may retain the services of a broker. The broker would then locate a trucking company that is ready and able to haul the lumber. This may result in significant savings for the lumber company because the broker may have trucking contacts that are able to
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8 The Illinois Commerce Commission, https://www.icc.illinois.gov/motorcarrier/brokers/default.aspx.
haul the lumber at a significantly lower rate than the lumber company might be able to find on its own.
In Illinois, truck brokerage requires a license from the Illinois Commerce Commission.8 If the broker applicant is a corporation, the corporation must be qualified to do business in Illinois under the Illinois Business Corporation Act, and in order to qualify for a broker’s license, the applicant must demonstrate that they are fit, willing and able to provide brokerage service in compliance with the applicable laws. Id.
C. What is meant by “Leasing” trucks?
We conducted an exhaustive search of case law, legal and industry publications, as well as, governmental regulations, policies and legislations to address this question – what is meant by “leasing” trucks? Our search did not identify a significant amount of published data regarding “leasing” in the trucking industry. As a result, we consulted with key professionals in the transportation industry, namely Traci Baker and Jim Bramlett, who both have significant experience and/or knowledge of the current trucking practices and standards in Illinois. They not only reviewed and concurred with our findings, but also, provided us with additional information that we discuss below.
Under the US DOT regulations, a DBE can supplement its fleet by leasing a truck(s) from an established equipment leasing business open to the general public. Id. The lease must indicate that the DBE has exclusive use of and control over the truck. Id. This requirement does not preclude the leased truck from working for others during the term of the lease with the consent of the DBE, so long as the lease gives the DBE absolute priority for use of the leased truck. Id.
Otherwise, the DBE does not receive full credit for DBE participation. Leased trucks must display the name and identification number of the DBE. Id.
In the trucking industry, leasing trucks typically refer to either the relationship between a driver and his vehicle or the relationship between a driver and his employer/contractingprincipal.
There are two types of truck drivers. There are truck drivers that work for a trucking company as employees. There are also truck drivers who own or lease their own trucks and contract to do work for a trucking company as independent contractors. There are two subdivisions of independent contractors or those that own or lease their trucks: lease/purchase; and lease.
Regarding a lease/purchase, many trucking companies have a lease/purchase program that will allow a driver to lease a truck with an option to buy. Terms for these contracts vary from company to company, but these lease/purchase programs usually require little or no money up front and do not have a credit score requirement. Many drivers use this program if
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they do not want to or are unable to invest their own money upfront to become an Owner Operator. This driver is a Lease Operator, and the engagement is essentially lease-financing.
Regarding a lease, a truck driver could also lease a truck from a company or dealership in the same way that the average person can lease a vehicle from a car dealership. The truck driver would make monthly payments of a determined amount. In some cases, just as with a lease/purchase, the truck driver would not have to make a down payment or have good credit.
The major difference is that the driver does not intend to buy the truck. Often at the end of the contract term, the trucking company will lease them another new or semi-new truck.
We now discuss the relationship that a driver has with the trucking company with which they are affiliated. If a truck driver is not an employee of a trucking company, they are described in the industry as “leasing-on.” The truck driver is leasing a truck on with or to a company as an “Owner Operator”. The term “Owner Operator” refers to drivers who own or lease their trucks.
In the trucking industry, the drivers would be described as an Owner Operator leasing usage of their truck to a carrier. In this relationship, a carrier leases a driver who always has a truck. It would be uncommon for a carrier to lease only a truck, and not a driver. Similarly, a trucking company would not typically lease a driver without a truck.
Although not used often, there are times when a truck driver affiliated with a carrier might be referred to as a “Lease Operator” as opposed to an Owner Operator. These instances would only occur when the truck driver leases their truck from the carrier with which they are affiliated. Again, this would only apply to truck drivers leasing their trucks from the carrier they drive for, and not for drivers who own their trucks, nor to drivers who lease their trucks from other sources, such as truck dealerships or another trucking company. The usage of the term “Lease Operator” is about evenly split with the usage of the term Owner Operator, and is most commonly used by the companies with which these drivers are affiliated, and not so often with other drivers.
For example, a truck driver who leases his truck from the same company he drives for has about a 50% chance of seeing the term “Lease Operator” (instead of Owner Operator) on his pay check or any other document or paperwork coming from the company he is driving for.
Other drivers, even those that drive for the same company, would still call the driver an Owner Operator.
By leasing on to a carrier, truck drivers are making an agreement to render the service of their truck. Some benefits to leasing on to a carrier are that the company finds freight for the driver; the company provides dispatching service; the company negotiates rates; the company does all of the paperwork; the company handles fuel taxes; the company arranges insurance; the company provides maintenance at the company’s shop at a reduced rate; and that up front expenses may be spread out over a period of time.
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9 US DOT DBE regulations 49 C.F.R §370.1.
10 Merriam-Webster Dictionary, https://www.merriam-webster.com/dictionary/lease.
D. What is the difference Between a Broker and a Lease? Under the US DOT DBE regulations, brokers are “…person[s] who for compensation, arranges or offers to arrange for transportation of property by an authorized motor carrier. Motor carriers or persons who are employees or bona fide agents of motor carriers are not brokers within the meaning of this section when they arrange or offer to arrange for shipments which they are authorized to transport and which they have accepted and have legally bound themselves to transport.”9
As previously mentioned, broker refers to negotiations to haul material in which a broker assists shippers with freight ready to haul by locating carriers that are qualified to haul the load.7 Brokers are responsible for brokering deals with shippers and facilitating the movement of a shipper’s freight. Id.
Whereas, a lease is legally defined as a contractual agreement by which one party conveys an estate in property to another party, for a limited period, subject to various conditions, in exchange for something of value, but still retains ownership.10 The federal regulations do not specifically define lease although the regulations allow a DBE to supplement its fleet by leasing a truck(s) from an established equipment leasing business open to the general public.9 The lease must indicate that the DBE has exclusive use of and control over the truck. Id. This requirement does not preclude the leased truck from working for others during the term of the lease with the consent of the DBE, so long as the lease gives the DBE absolute priority for use of the leased truck.
A “lease” has several meanings in the trucking industry, as previously discussed. The term “lease” could refer to a lease/purchase or a lease as those terms apply to a driver’s ownership of a truck. A lease/purchase allows a truck driver to lease a truck with an option to buy, whereas a lease would deal with a truck driver who leases their truck without expecting ownership. Additionally, the term “lease” might refer to the industry terminology of “leasing-on” in which a truck driver acts as an independent contractor for a trucking company in the manner previously described.
One unlikely reference to the term “lease” that could be referred to is also the rare occasion where a driver, acting as an independent contractor, might be referred to as a Lease Operator. These instances would only occur when the truck driver leases their truck from the carrier with which they are affiliated. Again, this would only apply to truck drivers leasing their trucks from the carrier they drive for, and not for drivers who own their trucks, nor to drivers who lease their trucks from other sources, such as truck dealerships or another company.
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11 Federal Department of Transportation,
http://www.fdot.gov/construction/DistrictOffices/d5web/Divisions/Compliance/workshops/Fall2016/Certi fied%20Payrolls%20Presentation.pdf, See also:
https://www.fhwa.dot.gov/construction/contracts/dbra_qa.pdf 12 Federal Department of Housing and Urban Development, https://www.hud.gov/sites/documents/4812- LRGUIDE.PDF.
E. When is it required for a Trucking Company to Report on Certified Payrolls? There are certain instances where a trucking company is required by law to report on certified payrolls.11 This must be done under The Davis-Bacon Act, which applies to contractors and subcontractors performing on federally funded or assisted contracts in excess of $2,000 for the construction, alteration, or repair (including painting and decorating) of public buildings or public works. The Davis-Bacon Act provides that contractors and subcontractors must pay their laborers and mechanics employed under a contract no less than the locally prevailing wages and fringe benefits for corresponding work on similar projects in the area. The Davis-Bacon Act also directs the Department of Labor to determine such locally prevailing wage rates. The requirement to submit certified payrolls is excluded for roadways functionally classified as local roads or rural minor collectors. Id.
The prime contractor and every subcontractor of every tier or level must have certified payrolls submitted weekly, beginning with the first week that the company works on the project and for every week afterward until the company has completed its work, regardless of the subcontract dollar amount. This requirement is for all laborers and mechanics working on the job site, but does not apply to supervisors or professionals. Id. Weekly payrolls are called certified because each payroll is signed and contains language certifying that the information is true and correct.12
The easiest form to use is the U.S. Department of Labor (“DOL”) Form WH-347, Payroll, although utilization of this form is not required. Id. Certified payrolls may be submitted on any other type of payroll, such as computerized formats, as long as it contains all of the information that is required on the WH-347. Id. Additionally, “no work” payrolls may be submitted whenever there is a temporary break in work on the project. For example, no work payrolls may be submitted if a firm is not needed on a project right now, but will be returning to the job in a couple of weeks. Id.
The prime contractor is responsible for the full compliance of each of its subcontractors on the contract. The prime contractor may be held accountable for any wage restitution that may be found due to any laborer or mechanic that is underpaid and for any liquidated damages that may be assessed for overtime violations. Id. All of the payroll reports for any project must be
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submitted through the prime contractor. Id. The prime contractor should review each subcontractor’s payroll reports for compliance prior to submitting the reports. Id.
Each contractor and every subcontractor must keep a complete set of their own payrolls and other basic records, such as employee addresses and full SSNs, time cards, tax records, evidence of fringe benefit payments, for a Davis-Bacon project for at least 3 years after the project is completed. Id. The prime contractor must keep a complete set of all of the payrolls for every contractor, including subcontractors, for at least 3 years after completion of the project. Id.
F. What is meant by “Owner Operator”?
As previously mentioned, the trucking industry term “Owner Operator” applies for drivers owning or leasing their trucks. It is an industry term that describes the driver as an independent contractor. In the trucking industry, the drivers would be described as an Owner Operator who leases the usage of their truck to a carrier. In this relationship, a carrier leases a driver who always has a truck. It would be uncommon for a carrier to lease only a truck and not a driver. Similarly, a trucking company would not lease a driver without a truck. An Owner Operator is a truck driver who “leases on” to a company. Owner Operators are not company employees, but are independent contractors “leased-on” to the company.
G. What is the reporting requirement for an Owner Operator as it relates to reporting wages and reporting on a certified payroll document?
As described above, there are certain instances where a trucking company is required by law to report on certified payrolls.11 This must be done under The Davis-Bacon Act which applies to contractors and subcontractors performing on federally funded or assisted contracts in excess of $2,000 for the construction, alteration, or repair (including painting and decorating) of public buildings or public works.
The prime contractor and every subcontractor of every tier or level must have certified payrolls submitted, regardless of the subcontract dollar amount. Id. This requirement is for all laborers and mechanics working on the job site, but does not apply to supervisors or professionals. Id.
For an Owner Operator/sole proprietor or business owner that does not receive payroll checks or that pays themselves an hourly salary, the certified payroll would indicate that the work was performed by the named “Owner Operator”. The certified payroll would not need to show hours worked or the rate of pay. Id. If the truck driver is paid by salary, draw, or contract
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13 Chicago City Code (“Chicago Code”) § 4-4-020.
payments, he/she should be able to provide the following information for any work that he/she performed on public works projects: (a) their name, address, and SSN (or FEIN, if they have no SSN); (b) work classification for their prevailing wage work; (c) hourly rate for that classification; (d) number of hours that they performed that work; and (e) estimated amount paid to them for their labor for that work. Id.
H. If a certified trucking company purchases materials from a quarry and hauls it to the job site, why is M/W/DBE credit not granted? It is the City’s understanding that although this is the industry standard, municipalities do not allow for DBE/MBE/WBE contract participation credit to be counted. Why? Under the US DOT DBE regulations, contractors can count 60% of the value of supplies and materials purchased from a DBE supplier only if that DBE supplier is a regular dealer.6 The regulations define “regular dealers” as: a firm that owns, operates, or maintains a store, warehouse, or other establishment in which the materials, supplies, articles or equipment of the general character described by the specifications and required under the contract are bought, kept in stock, and regularly sold or leased to the public in the usual course of business.” Id. If a DBE trucking company purchases materials from a quarry and hauls it to the job site, 60% credit should be granted by the City to the contractor for the value of the supplies and materials purchased from the company if it is certified as a supplier and regular dealer. In addition, the contractor should receive credit for the work performed by the DBE trucking company in hauling the supplies and materials from the quarry to the job site.
With respect to the materials or supplies purchased from a DBE which is neither a manufacturer nor a regular dealer, the City may count the entire amount of fees or commissions charged for assistance in the procurement of the materials or supplies, or fees or transportation charges for the delivery of materials or supplies required on a job site, toward the DBE contract participation goals. The fees must be reasonable and not excessive, as compared with fees customarily allowed for similar services.
I. There are a number of single-owner truck operators currently certified as an DBE, MBE and/or WBE that use their personal residence as their principal business office. These owners typically work as independent truck operators for larger trucking concerns on a per job basis. The “business” office is generally used by the owner/operator for receipt of mail, clerical/bookkeeping/administrative purposes and is not accessible to the general public for purposes of conducting business. In most cases, the actual truck is stored in another location. The City has been advised by its consultant that due to zoning restrictions concerning home-based businesses, such single-owner operators listing their home as their principal office would not be eligible for a General Business License with the City. A business license is required
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13 Chicago City Code (“Chicago Code”) § 4-4-020.
as part of the determination of MBE/WBE certification eligibility. This has recently resulted in recommendations of denial of certification for several applicants, and may have an impact on those operators currently certified with the City who use their personal residences as their business office.
The City has recently requested clarification regarding this issue in additional to the other questions that have been asked of us. In particular, if an independent Owner Operator stores their truck in a non-residential location, in compliance with zoning regulations, would this suffice for purposes of obtaining the necessary license? If so, what would be required as documentation? The City seeks clarification on actions that can and/or should be taken in these situations.
We have carefully reviewed the Municipal Code of Chicago (“Municipal Code”), particularly Chapter 4 regarding business licenses. The Municipal Code is clear in its mandate that no business activity may take place without first obtaining the required business license(s).13 The Municipal Code states that “It shall be unlawful for any person to operate any business… …without first having obtained the required license(s) for such business. Each location at which a business operates must be separately licensed. Except as otherwise provided in Title 4, any person violating this section shall be fined not less than $250.00 nor more than $500.00 for each offense. Each day that a violation continues shall constitute a separate and distinct offense.” Id.
A DBE applicant or certified business which operates out of the home of the majority women or minority owner without having a General Business License is operating illegally and would be subject to fines and penalties. Such a business owner might encounter additional problems with the City since the Municipal Code further provides that “No property owner shall allow any person to operate on such owner's property any business for which a license is required under this Code without a license first having been obtained for such business.” By operating the business out of their personal residence and without a license, such a business would be violating two City ordinances: 1) operating a business without a license; and 2) as a property owner, permitting a business to be operated without a license on the owned property.
Because a DBE applicant or certified business which operates out of the home of a majority minority or women owner without having a General Business License is operating illegally, we do not recommend that these businesses are certified by the City until or unless it changes its General Business License requirements for trucking companies. If the City should certify these companies without changing the current General Business License requirements, it
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14 Chicago Code § 17-9-0202-B.
15 Chicago Code § 17-9-020-C(1)
could be problematic for all parties involved. It could appear to City prime contractors, private entities which rely on the City’s certification determinations and other government agencies that the City is approving and supporting the illegal operations of DBE/MBE/WBE applicants and certified trucking companies on City contracts. As a result, the DBE/MBE/WBE applicants and certified trucking companies could incur significant fines that may prevent them from meeting their contractual obligations and their prime contractors from meeting their DBE contract participation goals. This could further result in prime contractors incurring penalties for their DBE noncompliance or shortfall on City contracts.
In order to avoid these possible outcomes and burden to each of the contracting parties, including the City, we recommend that the City continue to not certify DBE applicants and certified trucking companies that do not have a General Business License. On the other hand, if the City is seeking to facilitate the DBE/MBE/WBE certification eligibility of single-owner truck operators, it should consider changing its General Business License requirements to allow these businesses to qualify for a General Business License or an exception under the requirements, so that it will not be deemed unlawful for them to operate their businesses without a General Business License. Alternatively, the City should consider accepting a Home Occupation Business License from DBE/MBE/WBE single-owner truck operators for certification eligibility purposes in lieu of a General Business License.
The City’s Home Occupation Ordinance establishes guidelines for home-based businesses in Chicago for the purpose of balancing the ability of persons to operate a business from their place of residence and the need to maintain the residential character of the surrounding communities. The Ordinance only applies to individuals who are self-employed or operate their own business. At first glance, the Ordinance appears to apply to DBE/MBE/WBE single-owner truck operators who use their personal residence as their principal business office for the receipt of mail and for clerical/bookkeeping/administrative purposes.
The Code makes it clear that this type of activity is allowed as home occupations only if the individuals comply with all of the standards outlined in the Code.14 In order to qualify as a home occupation and receive a business license from the City, the truck operators would have to use the home primarily as a residence, and only secondarily as a business and the home occupation must not change the residential character of the residential building or adversely affect the character of the surrounding neighborhood.15 As described by the City, the DBE/MBE/WBE trucking firms in question have been using their residences in this way.
The next standard that truck operators would need to comply with is that “No more than one non-resident employee is allowed in conjunction with a home occupation. All other
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16 Chicago Code § 17-9-0202-C(2).
17 Chicago Code § 17-9-0202-C(3-5).
18 Chicago Code § 17-9-0202-C(6).
19 Chicago Code § 17-9-0202-C(7).
employees must reside in the dwelling unit in which the home occupation is located and that no more than two patrons or clients may be present in the dwelling unit at any one time, and no more than 10 clients or patrons may be present in the dwelling unit during any 24-hour period.”16 In the scenario described by the City, the only person associated with the business is the truck operator, and no “patrons” at all are specified as visiting the premises, so these truck operators would also meet this requirement for a home occupation license.
The next few requirements dictate that “No separate entrance from the outside of the building may be added to the residential building for the sole use of the home occupation, [that] the home occupation may not display or create any external evidence of the operation of the home occupation, and [that] there may be no internal or external structural alterations or construction, either permanent or accessory, to the dwelling unit, nor the installation of any equipment which would change the residential character of the dwelling unit or residential building.”17 These requirements relate to the physical characteristics of the home and are intended to ensure that the home occupation does not change the looks and feel of the residential area of the home.
While the single-owner trucking situation described by the City may seem to fit neatly into the qualifications of a home occupation, there could be a problem with licensing these types of trucking companies. Under the applicable ordinance, “The home occupation and all related activities, including storage, must be conducted completely within the dwelling unit and may not be operated from an accessory structure or garage.”18. The sole issue here is that all of the work must be done on the premises. In the scenario presented by the City, the actual hauling work that is performed by the truck driver is not done within the home, and so it may not qualify as a “home occupation.”
The next requirement covers how much of the floor space of the residence may be used in the operation of the home occupation. “The total floor area [must] not occupy more than 10% of the floor area of any detached house or 15% of the floor area of any other type of dwelling unit; provided, however, that in no instance may one or more home occupations in any single dwelling unit permanently occupy more than 300 square feet of the dwelling unit.”19.
The next two requirements primarily involve the delivery and sale of goods. There can be “No direct sale of any product on display shelves or racks is permitted,” and “Bulk deliveries related to a home occupation are limited to one per day (in addition to United States mail service, Federal Express, U.P.S. and messenger services) and may only occur between the hours
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20 Chicago Code § 17-9-0202-C(8-9).
21 Chicago Code § 17-9-0202-C(10-11).
of 8:00 a.m. and 5:00 p.m. No delivery via tractor trailer is permitted.”20 In essence, the home residence cannot be turned into a storefront, similar to a shop or corner store. Traditional issues of nuisance such as orders, noise, smoke, heat, and lights are also prohibited, and specific occupations such as stables, kennels, bird keeping, and others are prohibited as well. 21 None of
these provisions would likely prohibit DBE/MBE/WBE single-owner truck operators, as described by the City, from obtaining a business license for a home occupation.
Again, if the City is seeking to facilitate the DBE/MBE/WBE certification eligibility of single-owner truck operators, it should consider changing its General Business License requirements to allow these businesses to qualify for a General Business License or an exception under the requirements, so that it will not be deemed unlawful for them to operate their businesses without a General Business License. Alternatively, the City should consider accepting a Home Occupation Business License from DBE/MBE/WBE single-owner truck operators for certification eligibility purposes in lieu of a General Business License. We have identified, however, a potential barrier to these trucking firms to overcome in order to qualify for a Home Occupation Business License, namely, that all of the work that they perform at their residence must occur on the premises of the residence. Since the bulk of the actual work being performed by these truck operators is trucking services, it is not possible for it to be performed completely on the premises that those operators are describing as their general place of business. As a result, the City may need to waive this requirement, in order for DBE/MBE/WBE single-owner truck operators to obtain a Home Occupation Business License for DBE/MBE/WBE certification eligibility.
III. Summary
This memorandum provides additional information to the City’s Department of Procurement Services regarding how trucking companies operate in Illinois to: 1) re-evaluate its process or requirements governing the DBE/MBE/WBE certification eligibility and/or compliance of trucking companies; and 2) determine whether it should modify its DBE/MBE/WBE certification eligibility and/or compliance requirements or policies which govern trucking companies that participate on City contracts.
After conducting extensive research, we made every effort to answer the specific questions of the City regarding how trucking companies operate. This memorandum summarizes our research on each of the issues presented by the City. In addition, we address the issue regarding DBE/MBD/WBE single-owner truck operators that use their personal residence as their principal business office and store their truck at another location.
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Our answers to the questions provided by the City illustrate our comprehensive research and related communications regarding the applicable US DOT DBE regulations and standard/common industry practices for the trucking industry. It is our intent that the answers provided will be of great assistance as the City examines its DBE/MBE/WBE certification and contract compliance processes as they relate to DBE/MBE/WBE trucking applicants, certified firms and the firms with which they are affiliated in the trucking industry. By carefully reviewing and fully complying with the information and guidance that we have provided in this memorandum, we are hopeful that the City will better understand the trucking industry and be well positioned to address DBE/MBE/WBE certification eligibility and contract compliance issues related to trucking companies that participate or seek to participate in the City’s DBE/MBE/WBE Program.
We appreciate the opportunity to complete this assignment for the City and appreciate your confidence in our legal services. Please let us know if you have any questions or comments about the information that we have provided in this memorandum. We are happy to meet with you and your colleagues to further discuss each of the questions and our responses, as well as, to provide related employee training. We are also available to provide a written DBE/WBE/MBE certification eligibility and contract compliance analyses, so that the City has additional guidance on how it should interpret, apply and/or enforce the information that we have provided. Please do not hesitate to let us know if we can be of further assistance.
M E M O R A N D U M
TO: Anita Ponder, Partner
FROM: Dragomir Tsvetenov; Associate
DATE: August 31, 2018
RE: Social Benefit Enterprises
What are Social Benefit Enterprises?
Economic and Political Weekly magazine defines a social enterprise as an organization that applies commercial strategies to maximize improvements in financial, social and environmental wellbeing—this may include maximizing social impact alongside profits for external shareholders. As a result, their social goals are embedded in their objective, which differentiates them from other organizations and corporations. A social enterprise's main purpose is to promote, encourage, and make social change. Mathew, P. M. (2008). "Social Enterprises in the Competitive Era". Economic and Political Weekly. 43 (38): 22–24.
Governmental Social Benefit Enterprise programs are a fairly recent development and have a large variance in application. Generally, they bestow benefits to social enterprises, and particularly those that are located, operate, and provide benefits for the community granting the benefit/s. Usually, a municipality will find that it is beneficial to the community to promote and facilitate businesses that distinguish themselves by accounting for their measurable social, public health, and/or environmental impact (usually called “social Enterprises”).
Because social business enterprises, which may include nonprofit and for-profit business, often incur higher operating costs in the provision of their support services, in many instances, they are left at a competitive disadvantage in obtaining municipal concession and other contracts. Municipal Social Benefit Enterprise programs are a race and gender neutral way to establish a purchasing and contracting preference for businesses that provide a societal good such as employment, environmental conservation/protection, humanitarian, human rights, and other similar types of goods and services. The implementation of social enterprise preferences are designed to promote and foster inclusiveness and economic development, and usually contain ongoing evaluations the assure than all businesses, including the social business Enterprises, are provided equal opportunities in concession, purchasing, and contracting from the government.
Who can be considered a social Enterprise?
1 M E M O R A N D U M
TO: Melinda Kelly, Chairman/ President
Chatham Business Association
FROM: Anita Ponder, Partner
Dragomir Tsvetenov, Associate Attorney
Quintairos, Prieto, Wood & Boyer, P.A.
DATE: April 30, 2021
RE: Disadvantaged Business Enterprise (“DBE”) Certification Eligibility:
Increasing Business Size Standards and Personal Net Worth Standards for Participation in the Department of Transportation (“DOT”) DBE Program Executive Summary
This memorandum discusses the process by which an agency modifies, changes or repeals administrative regulations, also known as “rules.” It will focus on that process (called rulemaking), discussing the DOT increasing its personal net worth standards, and the SBA increasing its size standards for businesses to be considered “small.” The memorandum begins with an introduction to the DOT’s DBE program and shows how that program is affected by the SBA’s small business size standard determination. The memo then discusses the two primary issues: 1) how minority businesses which are certified as DBEs are encountering problems once their revenues reach a point that they are no longer considered small by the SBA (and therefore cannot participate in the DOT’s DBE program), and 2) how DOT’s limits on personal net worth exclude minority businesses from participation in the DBE program due to lack of economic disadvantage. The memo goes into how a change in DOT and SBA rules will permit more minority businesses to remain certified as DBEs and therefore continue to take advantage of that program.
Next, the memorandum goes into the process by which the DOT and the SBA change their personal net worth and size standards rules, respectively, including what considerations the DOT and SBA take into account with regards to personal net worth and business size standards.
Finally, the memo ends with specific recommendations to the CBA and other minority business advocates, members of the business community who may be stakeholders, and legislators who may wish to offer assistance.
2 I. Introduction
A. Background Information and Purpose of Memorandum
Our law firm, Quintairos, Prieto, Wood & Boyer, P.A. (“QPWB”), reviewed the process by which agencies change their rules so that minority businesses do not prematurely graduate from the DBE program before they are able to compete with non-minority businesses in the marketplace.
1. Disadvantaged Business Enterprise (“DBE”) Program
The DOT’s DBE program is designed to remedy ongoing discrimination and the continuing effects of past discrimination in federally-assisted highway, transit, airport, and highway safety financial assistance transportation contracting markets nationwide.1 The primary remedial goal and objective of the DBE program is to level the playing field by providing small businesses owned and controlled by socially and economically disadvantaged individuals a fair opportunity to compete for federally funded transportation contracts. Id.
The DBE program seeks to remedy past and ongoing discrimination by setting goals on federally funded contracts that seek to ensure that minority business are given opportunities to participate. For example, a contract to build a new highway may have a goal of 30 percent DBE participation. Agencies publish the contract goal in an advertisement to all bidders. Because the contract has a DBE goal, only a bidder that demonstrates adequate good-faith efforts to meet the goal qualifies to be awarded the federally funded contract, provided that the bidder is deemed responsive with regards to all other bid requirements.
2. How the DBE Program applies locally
DOT's Operating Administrations distribute substantial funds each year to finance construction projects initiated by state and local governments, public transit and airport agencies.
Id. DOT ensures that firms competing for DOT-assisted contracts for these projects are not disadvantaged by unlawful discrimination. Id. The Department’s most important tool for meeting this requirement has been its DBE program, which originally began in 1980 as a minority/women’s business enterprise program established by regulation under the authority of
1 https://www.transportation.gov/civil-rights/disadvantaged-business-enterprise
3 Title VI of the Civil Rights Act of 1964 and other nondiscrimination statutes that apply to DOT financially assisted programs. Id.
To meet the stated objectives of the DBE Program Regulation, recipients of DOT funds develop and implement a DBE program that conforms to the DOT standards set forth in 49 CFR Part 23 and 49 CFR Part 26. Id. The integrity of DOT's DBE program depends upon systematic procedures to ensure that only bona fide small firms, owned and controlled by a socially and economically disadvantaged individual(s), are certified to participate as DBEs in DOT federally assisted programs. Id.
Illinois agencies that receive federal DOT funding include the State of Illinois Department of Transportation (“IDOT”), Cook County, the City of Chicago (and its sister agencies), the Metropolitan Rail Corporation (METRA), and PACE (the suburban bus and regional paratransit division of the Regional Transportation Authority in the Chicago metropolitan area).
3. DBE Program Eligibility
In general, to be eligible for the DBE program, persons must own 51% or more of a "small business," establish that they are socially and economically disadvantaged within the meaning of DOT regulations, and prove they control their business.2 “Small business” means a firm (including its affiliates) must be a small business as defined by SBA standards. Id.
Many minority owned firms have found themselves experiencing problems associated with their business generating sufficient revenues so that they are not considered “small,” however they still do not have capacity to compete adequately without the DBE program. Some minority business owners also exceed the applicable DBE personal net worth requirements that exclude them from being deemed economically disadvantaged by the DOT.
4. Our efforts in this memorandum
We conducted legal research regarding the rule making process including what information should be shown to government agencies to push for rule changes. We further followed-up with a former federal agency administrator familiar with the information to confirm that our interpretation of our research is correct.
Upon the completion of our legal research and discussions, we summarize here: 1) the process by which rulemaking is conducted; and 2) what specifically should be shown to agencies during the notice and comment period of rulemaking for them to change rules that will expand
2 https://www.transportation.gov/civil-rights/disadvantaged-business-enterprise/eligibility
4 the DBE certification eligibility requirements so that more minority businesses can participate and/or continue to participate in DBE programs.
II. Issue
The issues here are that many minority businesses are encountering problems associated with graduating from the DBE program too soon and that many of those business owners have a net worth that restricts them from participating in the DBE program. In the first issue, a firm that is currently a DBE may be successful due to the DBE program, however, due to that success, their revenues put them over the SBA size standards required to be considered a small business.
Those same companies then suffer from the same types of issues that made them eligible for the program to begin with including past and ongoing discrimination. In order for those minority businesses to continue being able to fulfil goals under the DBE program, the SBA would need to increase the business size standards so that those minority businesses are still considered small.
The second issue, many minority business owners with a high personal net worth similarly see themselves excluded from participation in the DBE program because the DOT does not consider them to be economically disadvantaged. This memorandum discusses the process by which agencies change, or adjust, modify or repeal their rules so as to include those minority businesses that are currently being prevented from participating.
III. Background Information
A. Rulemaking/ Notice and Comment
Government agencies usually use informal rulemaking procedures when creating new administrative regulations, also known as “rules,” or when modifying or repealing existing rules.3 This process requires the agency to accept public comments. Id. The informal rulemaking process is therefore also referred to as “notice and comment” rulemaking. Id. Government agencies at the federal and state level use this process for most rulemaking actions. Id.
The notice-and-comment process enables anyone to submit a comment on any part of the proposed rule. Id. This process is not like a ballot initiative or an up‐or‐down vote in a legislature. Id. An agency is not permitted to base its final rule on the number of comments in support of the rule over those in opposition to it. Id. At the end of the process, the agency must base its reasoning and conclusions on the rulemaking record, consisting of the comments,
3 Justia Legal Encyclopedia. https://www.justia.com/administrative-law/rulemaking-writing-agencyregulations/notice-and-comment/
5 scientific data, expert opinions, and facts accumulated during the prerule and proposed rule stages. Id.
B. Notice and Comment Process
To move forward with a final rule, the agency must conclude that its proposed solution will help accomplish the goals or solve the problems identified. It must also consider whether alternate solutions would be more effective or cost less. Id. If the rulemaking record contains persuasive new data or policy arguments, or poses difficult questions or criticisms, the agency may decide to terminate the rulemaking. Id. The agency may also decide to continue the rulemaking but change aspects of the rule to reflect these new issues. Id. If the changes are major, the agency may publish a supplemental proposed rule. Id. If the changes are minor, or a logical outgrowth of the issues and solutions discussed in the proposed rules, the agency may proceed with a final rule. Id.
People may mail or fax their comments on a proposed rule directly to the agency, or they may comment through a web portal maintained by the federal government at regulations.gov. Id.
Individual agencies may also accept comments on their own websites. Id.
C. Notice and Comment Special Considerations
Agencies must consider all “relevant matter presented” during the comment period and they must respond in some form to all comments received. Id. They are not, however, required to take any specific action with regard to the rule itself. Id. The publication of the final rule must include analyses of any relevant data or other materials submitted by the public and a justification of the form of the final rule in light of the comments the agency received. Id.
If opposition to the proposed rule is exceptionally large or strident, the agency may decide to make substantial modifications and start the process over by publishing a new notice and opening a new comment period. Id. Otherwise, the agency will publish its final findings along with the rule, which is codified in the Code of Federal Regulations. Id.
D. Rulemaking
If an agency receives a “Petition for Rulemaking” from a member of the public, it may decide to announce the petition in the Federal Register and accept public comments on the issue.
Id. An agency that is in the preliminary stages of rulemaking may publish an “Advance Notice of Proposed Rulemaking” in the Federal Register to get more information. Id. The Advance
6 Notice is a formal invitation to participate in shaping the proposed rule and starts the notice‐and‐ comment process in motion. Id.
Anyone interested (individuals and groups) may respond to the Advance Notice by submitting comments aimed at developing and improving the draft proposal or by recommending against issuing a rule. Id. Some agencies develop proposed rules through negotiated rulemaking.
Id. In this process, an agency invites members of interested groups to meetings where they attempt to reach a consensus on the terms of the proposed rule. Id. If the participants reach agreement, the agency may endorse their ideas and use them as the basis for the proposed rule.
Id.
The SBA reviews program standards every 5 years, and the next review is in 2023.4 The criteria for review include: 1) Legal authority, early legislative history, and regulatory history, 2) Evaluation of industry structure, federal market conditions, data sources, and 3) Adjustments of standards for inflation.
5 The DOT reviews its rules every 10 years.6 The DOT completed its most recent review of personal net worth standards in February of this year with no changes made to the standard. Id.
The DOT is not scheduled to reassess personal net worth standards until 2031. Id. The only consistent standards that the DOT utilizes when assesses personal net worth standards is inflation. Id. The personal net worth standard has only been increased, and the only consistent argument has been substantial inflation, and specifically as it related to the purchasing power or “…[ability] to buy the same amount of goods and services that $750,000 bought in 1989.” Id.
1. Legal Authority, Legislative History, and Regulatory History (SBA) 1a. Intent
The statutory language establishing the SBA provides the Administrator with broad discretion in establishing, reviewing, or revising size standards. Id. Reading the legislative history of the Act provides a better understanding of Congress’ intent in the Act. Id. The requirement that a small business concern be “independently owned and operated” requires SBA to define the size of a firm together with its affiliates when calculating its size.7 Therefore, SBA
must consider not only the size of a firm but also the size of all of its affiliates (both domestic
4 Small Business Administration. Final Rule for Small Business Size Standards. https://www.sba.gov/node/4846#:~:text=Specifically%2C%20the%20Jobs%20Act%20required,review %20of%20all%20size%20standards. 5 Small Business Administration. Size Standards Methodology. (https://www.sba.gov/document/support--sizestandards-methodology-white-paper) 6 https://www.transportation.gov/civil-rights/disadvantaged-business-enterprise/dbe-laws-policy-and-guidance 7 See Hearings on H.R. 4090 and H.R. 5141 before the Committee on Banking and Currency of the U.S. House of Representatives, 83rd Congress, 1st Session (1953), page 17.
7 and foreign) when establishing, reviewing, or revising size standards and when determining its small business eligibility for Federal government programs.8 In addition, Congress did not intend the phrase “is not dominant in its field of operations” to exclude firms that might dominate a geographic area.9 Rather, Congress intended to exclude
firms that dominate an entire industry, nationally.10 Congress also recognized that an extremely high percentage of business firms could properly be classified as small.11 The Banking and Currency Committee recognized the “impossibility of attempting to write into law a rigid definition of small business.”12 Therefore, section 3 of the bill defines a small business concern in a flexible and realistic manner.13 The Committee did this “because it has become universally recognized that it is utterly impossible to define small business rigidly in terms of number of employees, amount of capitalization, or dollar volume of business.” Id. 1b. The First Size Standards
In 1957, the House Committee on Banking and Currency addressed how to characterize a small business and stated that “no single definition may be expected to meet all requirements.” Id. Recognition of varying situations motivated the Committee in drafting the present Small Business Act to depart from rigid standards and leave the definition of small business to administrative determination.14
Current small business size standards evolved from a limited number of general size standards for broad industry groups or sectors to a larger number of specific size standards based on individual industries.15 This transition was recognition that different industries had different characteristics, and thus warranted appropriate industry specific size standards.16 Many of
8 Small Business Administration. Size Standards Methodology. (https://www.sba.gov/document/support--sizestandards-methodology-white-paper) 9 Small Business Administration. Size Standards Methodology. (https://www.sba.gov/document/support--sizestandards-methodology-white-paper) 10 See Hearings on S. 982. et al. before the Committee on Banking and Currency of the U.S. Senate, 83rd Congress, 1st Session (1953), page 56.
11 See comments of Representative Seely-Brown, Congressional Record-House, June 5. 1953, page 6141.
Representative Seely-Brown observed that more than 95% of business establishments could be classified as small and Representative Springer at page 6155 of the same Congressional Record observed that 95.2% of the businesses employed less than 20 people, so that on the basis of employment small business would be truly small in size. 12 See House Report No. 494, 83rd Congress, 1st Session (1953). 13 Small Business Administration. Size Standards Methodology. (https://www.sba.gov/document/support--sizestandards-methodology-white-paper) 14 See Senate Report No. 555, 85th Congress, 1st Session, page 6. That same report explains that the origins of the present statutory requirement that the Agency vary the size standards from industry to industry where number of employees is used as the criteria was the result of the Agency’s then existing flat 500-employee rule for all government contracts.
15 Small Business Administration. Size Standards Methodology. (https://www.sba.gov/document/support--sizestandards-methodology-white-paper) 16 See Senate Report No. 555, 85th Congress, 1st Session, page 6.
8 today’s size standards continue at levels established right after the SBA’s inception, except that receipts based size standards have been increased for inflation over the years. Id.
Over the years, SBA has adopted a broad range of size standards – manufacturing industry standards ranged from 250 employees to 1,500 employees; other industry size standards ranged from $0.10 million to $38.5 million in average annual receipts. Id. SBA establishes its size standards for industries using the latest NAICS industry definitions, developed by the Office of Management and Budget (OMB) in collaboration with U.S. Census Bureau, other U.S.
Federal Statistical Agencies, and Statistical Agencies of Canada and Mexico. Id. NAICS replaced the Standard Industrial Classification (SIC) system for SBA’s size standards on January 1, 1997. Id. SBA adopted NAICS as the basis for its table of size standards, effective October 1, 2000 (65 FR 30836 (May 15, 2000)). Id. OMB modifies or updates NAICS every five years and SBA adopts the NAICS updates for its table of size standards, effective October 1 of the same year. SBA has opted to use October 1 because that is the start of the Federal government’s fiscal year. Id.
1c. 500-employee size standard
The 500-employee size standard for Federal contracting predates SBA; it was used by the Reconstruction Finance Corporation and the earlier Small War Plants Corporation, which was a World War II Government contracting agency channeling Federal contracts to small manufacturers. Id. In 1957, the House Committee on Banking and Currency observed that “the standard of 500 or less employees originated in World War II with several variations. Id. For the want of a better definition, the 500 rule generally gained acceptance in the Government, although in many instances there was considerable reluctance by many Government officials and members of Congress to accept such a rigid formula.”17
SBA adopted 500 employees as the size standard for manufacturing industries at its 1953 inception; it has remained a standard for many industries until today and had long been considered the “anchor” size standard for employee based size standards. Id. In 1959, SBA’s size regulations distinguished between manufacturing and financial industries. Id. Specifically, the Agency adopted 250-employee, 500-employee, and 1,000-employee size standard for its financial assistance programs, but maintained the 500-employee size standard for Federal contracting programs. Id.
17 Small Business Administration. Size Standards Methodology. (https://www.sba.gov/document/support--sizestandards-methodology-white-paper)
9 1d. Annual Receipts Size Standard
Generally, the Agency has used annual receipts as the measure of size standards for nonmanufacturing industries. Id. Soon after its inception, SBA created size standards for nonmanufacturing based on annual receipts rather than employees. Id. In 1954, SBA established a $1 million in average annual receipts as the size standard for nonmanufacturing industries. Id.
Receipts based size standards were established subsequently for other industries. Id. They varied between $0.30 million and $1 million for retail trade and services industries, between $2 million and $5 million for wholesale trade industries, and $5 million for construction industries. Id. SBA has periodically increased all receipts based size standards for inflation. Id. With the inflation adjustment, the most common receipts based size standard of $1 million has increased to $7.5 million today. Id. The $1 million level and its inflation-adjusted equivalent had long been considered the “anchor” size standard for industries with receipts based size standards. Id.
By 1963, SBA receipts based size standards were as follows: $1 million for retail trade industries; $1 million for services industries; $5 million for wholesale trade industries; and $7.5 million for construction industries. Id. SBA continued using two sets of size standards for manufacturing industries – 250 employees to 1,000 employees for SBA financial programs, but basically 500 employees for Federal contracting programs. Id.
From 1963 to 1975, many manufacturing size standards were increased from 500 employees to 750 or 1,000 employees. Id. Similarly, some services industries, such as engineering and janitorial services were broken into separate industries, with size standards of $5 million and $3 million, respectively. Id.
1f. Size Standard Developments since 1975
In 1975, SBA adopted a general increase to its monetary based size standards for inflation (40 FR 32824 (August 5, 1975)). Id. As a result, the new size standards were $2 million for retail trade and services industries, $12 million for general construction, and $5 million for special trade construction. Id. Employee based standards remained unchanged. Id.
After a series of public notices in the Federal Register from 1980 to 1983, the Agency adopted a detailed list of size standards for industries as defined under the SIC system. Id.
Generally speaking, the size standards framework the Agency followed until the recently completed comprehensive size standards review was put in place in 1984. Id.
10 1g. Size Standard Developments since 1984
In 1984, to simplify procurement procedures, SBA adopted a single size standard of 500 employees for all wholesale trade industries, for both procurement and SBA programs (49 FR 5024 (February 9, 1984)). Id. Before that, the wholesale trade industries had a 500-employee size standard for Federal procurement and three levels of receipts based standards ($9.5 million, $14.5 million and $22 million) for SBA’s financial programs. Id. In 1986, SBA amended its standards for the wholesale trade industries from 500 employees to 100 employees for all SBA programs (51 FR 25189 (July 11, 1986)), while it retained 500-employee size standard for Federal procurement. Id.
1h. Size Standard Developments since 1992
In 1992, SBA proposed, along with an inflation adjustment, a reduction in the number of size standard levels from more than forty different levels to nine receipts-based size standards and five employee-based size standards (57 FR 62515 (December 31, 1992)). Id. SBA withdrew the proposed rule on February 19, 1993 (58 FR 9131) and re-published on September 2, 1993 (58 FR 46573). Id. Although public comments overwhelmingly accepted the fixed size standards approach, the proposed levels seemed arbitrary and produced large variations in changes to standards. Id. SBA believed it could not justify such large variations, and therefore, limited the final rule to adjusting the then existing receipts-based size standards for inflation (59 FR 16513 (April 7, 1994)). Id.
1i. Size Standard Developments since 2004
In March 2004, SBA proposed to simplify and restructure size standards by establishing all size standards based on number of employees (69 FR 13130 (March 19, 2004)). Id. For a number of industries, however, an employee based size standard could result in businesses with very high receipts but few employees to qualify as small. Id. There were other skewed outcomes as well, and SBA, therefore, also proposed a maximum receipts size standard along with an employee size standard for certain industries. Id. Public comments showed that for some industries the proposed employee based standards were either too low or did not serve as a suitable measure of business size. Rather than issuing a revised proposed rule with adjusted size standards, SBA decided to seek additional input from the public. Id.
Accordingly, in December 2004, the Agency issued an Advance Notice of Proposed Rulemaking (ANPRM) (69 FR 70197 (December 3, 2004)). Id. It sought comments on 10 specific issues that the public had raised in response to the March 2004 proposed rule. Id. SBA
11 did not make further proposals, but only sought public comment on whether and how it should consider the following: 1) Approaches to simplification of size standards; 2) Calculation of number of employees; 3) Use of receipts based size standards; 4) Designation of size standards for Federal procurements; 5) Establishment of size standards solely for Federal procurement; 6) Establishment of tiered size standards; 7) Simplification of small business status and affiliation with other businesses; 8) Joint ventures and small business eligibility; 9) Grandfathering of currently eligible small businesses; and 10) Impact of SBA size standards on the regulations of other Federal agencies. Id. SBA received several thousand comments on these issues, but no consensus. Id.
1j. Size Standard Developments since 2007
In 2007, SBA began a comprehensive review of all size standards to determine whether the existing size standards were consistent with current data, and to revise them, when necessary.
Id. In addition, on September 27, 2010, the President of the United States signed the Small Business Jobs Act of 2010 (Jobs Act), 111 Pub. L. 240, 124 Stat. 2504, Sep. 27, 2010. Id. The Jobs Act directs SBA to conduct, at least every five years, a detailed review of all size standards (except those for agricultural enterprises) and to make appropriate adjustments to reflect market conditions. Id. SBA recently completed the first five-year comprehensive size standards review and will begin the next five-year review in the near future. Id.
Of 1,009 size standards reviewed in the prior review, SBA increased 621, decreased three (to exclude potentially dominant firms from being considered small), and retained 388 at their existing levels. Id. Of the 388 standards that were retained, 214 were retained based on the results and 174 were retained based on SBA’s policy decision of not lowering any size standard in light of the economic environment, even though the results might have supported lowering them. Id. Section 1831 of NDAA 2017 requires SBA to include agricultural size standards in the five-year rolling review procedures established under the Jobs Act. Id. 1k. Most Recent Size Standard Developments
Currently, the most prevalent size standards are $7.5 million in annual receipts for Retail Trade and Services, $35.5 million for General Construction, $15 million for Special Trade Construction, 100 employees for Wholesale Trade for all Federal programs except for Federal procurement where it is 500 employees under the nonmanufacturer rule, and 500 employees for manufacturing industries. Id. Monetary based size standards range from $0.75 million in annual receipts for most Agricultural enterprises (which were set by statute until the enactment of NDAA 2017) to $38.5 million in annual receipts for Facility Support Services. Id. Similarly, employee based standards range from 100 employees for Heating Oil Dealers to 1,500
12 employees for some Manufacturing and Telecommunications industries. Id. With a very few exceptions, uniform size standards are now in place for all SBA’s programs. Id.
2. Evaluation of Industry Structure, Federal Market Conditions and Data Sources (SBA)
2a. Primary Factors
The primary factors that SBA evaluates in analyzing the economic characteristics defining the structure of an industry include average firm size18, start-up costs and entry barriers, industry competition, and distribution of firms by size (13 CFR § 121.102(a)). Id. SBA also examines the impact of an existing size standard as well as the potential impact of a size standard revision on small business participation in Federal contracting as an additional primary evaluation factor when establishing or reviewing the size standards. Id. SBA generally considers these five factors – average firm size, start-up costs and entry barriers, industry competition, size distribution of firms, and small business participation in Federal contracting – to be the most important elements in determining an industry’s size standard. Id.
18 Average Firm Size
SBA computes two measures of average firm size: simple average firm size and weighted average firm size. For industries with receipts based size standards, SBA calculates the simple average firm size in terms of receipts as follows: Simple Average size firm receipts = Total number of receipts in an industry [divided by] Total number of firms in that industry.
Similarly, for industries with employee based size standards, the simple average firm size is expressed in terms of the number of employees as follows: Simple Average size firm (employees) = Total number of employees in an industry [divided by] Total number of firms in that industry.
SBA does not have access to data on individual firms to compute on its own the weighted average firm size using these formulas. SBA requested the U.S. Census Bureau to provide the estimates of the weighted average firm size as part of the 2012 Economic Census special tabulations.
Average firm size is likely to be positively related to minimal efficient (optimal) firm size. The minimal efficient firm size refers to the level of output where firms in an industry are able to minimize their average cost of production and become competitive. Thus, conceptually, an industry’s size standard should be set such that firms that have not achieved a minimal efficient firm size to remain competitive will be considered small and thus be eligible for SBA assistance, while firms that are fully competitive would exceed the size standard and thus be considered ineligible. Everything remaining the same, the higher the minimal efficient firm size for an industry, the higher should be its size standard. In general, industries with high minimal efficient size tend to be dominated by larger firms and, thus, their average firm size (especially weighted average) tends to be large.10 Given the lack of data on minimal efficient firm size by industry, SBA uses the average firm size as the proxy of minimal efficient firm size.
Because firms often compete with each other across industry lines, it is reasonable to compare the average firm size of an industry relative to the average firm size of other industries and then to compute the size standard for the industry depending upon that comparison. If the average firm size of an industry is higher than the average firm size for most other industries, this would generally support a size standard higher than the size standards for other industries. Conversely, if the industry’s average firm size is lower than that of most other industries, it would provide a basis to assign a lower size standard as compared to size standards for most others industries.
13 2b. Other Factors Considered
Besides the primary factors, SBA also considers, if necessary, a number of other factors that are relevant when deciding a size standard for a particular industry. Id. These factors include, but are not limited to, technological changes, industry growth trends, SBA’s financial assistance and other program factors, the presence of competing or similar products among industries, and unique activity within an industry. Id.
SBA analyzes federal market conditions by comparing the federal market and industrywide shares attributed to small businesses. Id. Public comments on proposed size standard rules provide additional important information. Id. These comments can supplement SBA’s analysis of industry structure and Federal market conditions or the data it used, thereby enabling it to consider other relevant information, where appropriate, in the final decision on a size standard. Id.
2c. Economic Census Tabulation
The primary source of data SBA uses to examine industry characteristics is a special tabulation of the Economic Census from the U.S. Census Bureau. Id. The special tabulation is similar to the Enterprise Statistics, formerly published by the Census Bureau, except that the Economic Census data is limited to a business operation in its primary industry while the Enterprise Statistics also contained information on operations outside of the primary industry.
Id. The tabulation based on the 2012 Economic Census is the latest available, which SBA will use for evaluating industry characteristics for the forthcoming five-year comprehensive size standards review. Id. The 2012 special tabulation contains information for different levels of NAICS categories on average and median firm size in terms of both receipts and employment, total receipts generated by the four and eight largest firms, the Herfindahl-Hirshman Index (HHI), the Gini coefficient, and size distributions of firms by various receipts and employment size groupings. Id.
One limitation of the Economic Census special tabulation is that the employees and receipts figures are not fully displayed for some size classes due to disclosure prohibitions, mostly at the 6-digit NAICS industry level. Id. SBA estimates such missing values using the displayed data at the 6-digit level and data at higher levels of industry aggregation, such as at the 2- or 3-digit NAICS level for which such figures are fully displayed. Id. For example, because of disclosure restrictions, employee figures in certain cells of size distribution by employment size groups are given in ranges, such as, for industries where SBA is not able to estimate missing values for some industry categories, SBA bases its analysis only on those industry factors for which information is complete. Id.
14 Another limitation of the Economic Census tabulation relates to multi-establishment firms with establishments operating in different industries. Id. While the Economic Census is establishment-based, the industry specific data in the special tabulation from the Census Bureau are firm-based. Id. That is, if a firm has multiple establishments primarily operating in the same industry, their employment, payroll, and receipts data are aggregated and assigned to that firm in that industry. Id. If an enterprise has multiple establishments operating in different industries, the enterprise will be counted as a firm in each of those different industries, and the employment, payroll, and receipts data in each industry will be the data of the establishment operating in the specific industry. Id. Under SBA’s regulations, in contrast to the treatment under the Economic Census, a firm’s size for size standards purposes is based on total receipts or number of employees from all its establishments combined even if they operate in different industries. Id.
There is no solution to this discrepancy between how multi-establishment firms with establishments operating in different industries are treated in the Economic Census special tabulation and how SBA treats them in calculating firm size for size standards purposes. Id.
However, SBA does not expect this to be a serious problem as most firms either have a single establishment or have multiple establishments operating in the same industry. Id. 2d. Other Relevant Industry Data
Besides the Economic Census tabulation, SBA may also evaluate relevant industry data from other sources, especially for industries that are not covered by the Economic Census. Id.
These include the County Business Patterns published by the U.S. Census Bureau, the Longitudinal Business Database (LBD) from the Center for Economic Studies, Quarterly Census of Employment and Wages (QCEW, also known as ES-202 data) and Business Employment Dynamics (BED) data from the U.S. Bureau of Labor Statistics, and Census of Agriculture from the U.S. Department of Agriculture. Id. Similarly, to evaluate certain financial industries that have assets based size standards SBA examines the data from the Statistics on Depository Institutions (SDI) database of the Federal Depository Insurance Corporation (FDIC) data. Id.
3. Adjustments for Inflation (SBA)
In addition to reviewing all size standards and adjusting them, as necessary, every five years based on the analysis of industry and Federal contracting factors in accordance with the Small Business Jobs Act of 2010 (the Jobs Act) (Public Law 111-240, 124 Stat. 2504, Sept. 27, 2010), SBA also periodically adjusts all monetary based standards for inflation. Id. In accordance with SBA’s regulations (13 CFR 121.102(c)), an adjustment to size standards for inflation is made at least once every five years. Id. In response to higher than normal rates of inflation, some past inflation adjustments have been made on more frequent intervals. Id. SBA
15 also updates its size standards, also every five years, to adopt the Office of Management and Budget’s quinquennial NAICS revisions to its table of small business size standards. Id.
4. Arguments based on Inflation/ Purchasing Power (DOT) To qualify as a “socially and economically disadvantaged individual” for DBE purposes, an individual owner must fall below the personal net worth standard.*** Since 1989, this amount was capped at $750,000. Id. Thus, any individual owner whose ownership and control was relied upon for DBE certification had to have a personal net worth less than $750,000. Id. The current rule, however, adjusts this long-standing personal net worth cap to $1.32 million (almost double). Id. According to DOT, the inflationary adjustment, which is based on the Department of Labor’s consumer price index, and “…maintains the status quo in real dollar terms.” Id. When DOT assesses personal networth standards, it specifically looks as how much it would take to “…buy the same amount of goods and services that $750,000 bought in 1989.” Id.
IV. Recommendations
A. CBA/ Advocates
• The CBA must decide whether it will participate in the normal rulemaking process for both the SBA (to address size standards) and DOT (to address personal net worth standards), or whether it will submit a petition for rulemaking to either agency in order to begin the process early. In order for a petition for rulemaking to have the greatest chance of success, the petition should stress the reason for an acceleration in the timetable, and/or how the suggested rule change would bring the agency more closely into compliance with the current executive administration’s agenda.
• Seek likeminded stakeholders, including experts, industry leaders, legislators, etc who also wish to see the same changes to the agencies’ rules. These stakeholders can not only sign onto proposed comments, but can also combine resources for drafting comments. Although the CBA’s efforts are intended to assist primarily black owned businesses, other minority and women organizations would also see a benefit from this undertaking and might also support it. • Prepare comments to both the DOT and SBA, including the collection of data and arguments to encourage the agencies to change their rules. The more thorough the comments, the more likely that they are to be successful in persuading decision makers to accept a change to a rule being commented on.
16 • The CBA should provide data to the agencies, which should include scientific and economic data, and expert opinions that will help solve the problems identified.
The comments must have reasoning based on the rulemaking record, consisting of other/prior comments, scientific data, expert opinions, and facts that have accumulated with regards to the proposed change. Finally, the information submitted should also consider whether alternate solutions would be more effective or cost less.
• Submit comments to the agencies during the notice and comment period of the rulemaking process.
B. Business Stakeholders
• Members of the business community that wish to participate in this process can help mostly by providing economic support to this endeavor. Preparation of comments to the DOT and SBA should be more than just a persuasive letter - CBA will likely hire experts who will conduct studies and provide expert testimony. Engaging those experts will require financial resources, and business stakeholders can help to alleviate that financial burden. • Business stakeholders should also provide relevant information to CBA with regards to how the current size standards are negatively impacting their business and the community as a whole – especially with data, including financial and trend data.
• Business stakeholders should also sign on to the comments submitted to the agencies.
C. Legislators
• Legislator stakeholders can assist directly by signing onto the comments submitted by CBA. This brings added attention to the comments in question. • Legislators who wish to participate indirectly in this process should write a letter directly to the agencies which explicitly reference the comments submitted by the CBA.
V. Conclusion
The standard process with which executive government agencies, such as the DOT and SBA create and change rules and regulations is known as rulemaking. Agencies review their
17 rules and regulations regularly and institute rulemaking on their own, but can also be petitioned to do so ahead of schedule if a member of the public submits a petition for rulemaking to the agency. In either case, the agency must accept and consider public comments.
Persons and organizations must convince agencies that their proposed solutions will help accomplish the goals or solve problems that they identify in order to have those agencies change their rules. The persons or organizations must also consider whether alternate solutions would be more effective or cost less.
We hope that this information is helpful to the CBA as it continues in its mission to provide a viable and effective business association to enhance social, political, and economic growth within the Chatham community and creates opportunities, inroads and programs to benefit and ensure the prosperity, economic strength and excellence of service in Chatham and its surrounding communities. It is our intent that this information will be able to assist the CBA in its efforts to assist black businesses from prematurely graduating from the DBE program in furtherance of that mission. If you have any questions, please do not hesitate to reach out and contact us.